Ian Vicary, Chairman of the ISVA, has recently been asked about valuation uncertainty during the continuing Coronavirus pandemic and has provided the following wording as an example of what could be used in Valuation Reports:
Market conditions within the UK remain somewhat uncertain and volatile. There has been recent activity in most sectors of the residential market since the first lockdown was lifted but we enter a further period of national lockdown across the country with continued uncertainty going forwards affecting job and employment confidence.
Interest rates remain relatively low but some prospective buyers, especially new buyers and buyers senior in years are still finding it difficult to meet tight lending criteria restricting finance for some prospective purchasers.
There is, undoubtedly, uncertainty as to the economic conditions that will prevail going forward particularly due to ‘Brexit’, including during the current period of negotiation leading up to a formal exit.
It is rarely possible to predict with confidence levels of demand in the foreseeable future and this is becoming more pronounced with Brexit. At the present time there is more uncertainty in relation to many factors that historically have acted as drivers of the property development, investment, owner occupier and letting markets. Such political and economic circumstances are unprecedented but do result in a reduced level of certainty that can be attached to valuation. As previously stated the impact of Brexit will unfold over an extended period of time, including over the remaining period to formal exit.
In view of the above, we would advise you to have less confidence than usual in the probability that our opinion of value exactly coincides with the price achievable for the subject property. Although historically prices for residential property of this nature have generally risen over time, there is no guarantee on the future market, i.e. prices can fall as well as rise. It is possible that levels of market value will alter and fall within the timescale of the UK exiting Europe.
RICS Guidance on market and valuations
The outbreak of COVID-19, declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020, has impacted global financial markets. Travel restrictions have been implemented by many countries.
Market activity is being impacted in many sectors. As at the valuation date, we consider that we can attach less weight to previous market evidence for comparison purposes, to inform opinions of value. Indeed, the current response to COVID-19 means that we are faced with an unprecedented set of circumstances on which to base a judgement.
Our valuation(s) is / are therefore reported on the basis of ‘material valuation uncertainty’ as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less certainty – and a higher degree of caution – should be attached to our valuation than would normally be the case. Given the unknown future impact that COVID-19 might have on the real estate market, we recommend that you keep the valuation of the subject property under frequent review.
COVID-19 Health & Safety Policy
A health and safety policy has been put together for Members to use for their practice, if they wish. This can be downloaded by clicking here.