The Science View on Valuation
Estimating Property Values in Times of Significant Uncertainty
In times of Covid-19 pandemic, property market or fair values are harder than ever to estimate. Valuers desperately trying to find enough ‘evidence’, but property is an illiquid asset by definition and as such, transactional evidence disappears during periods of market unrest.
So, what can property valuers do in times of market uncertainty?
The International Valuation Standards Council (IVSC), whose standards have been adopted by the ‘RICS Red Book’, issued a letter in March 2020 with the title ‘Dealing with valuation uncertainty at times of market unrest’. Their advice was mainly based on three points:
- If the valuer can’t carry out an inspection due to government restrictions, clearly state it and agree this with the client.
- If the valuer considers that it is not possible to provide a valuation on a restricted basis, the instruction should be declined.
- Valuers should not apply pre-crisis criteria to their valuations as this approach is based on the potentially erroneous assumption that values will return to their pre-crisis levels and there is no way of predicting that this assumption in fact correct.