Valuations: certainty in uncertain times

Martin Hughes, Director, Eddisons incorporating Barker Storey Matthews, stresses the ongoing importance of evidence when it comes to deciding valuations in uncertain times.

Earlier this month (January), the RICS’ ‘think tank’ on material uncertainty clauses (MUCs) convened to conclude that the trading circumstances of repeated lockdown phases were no bar to qualified professionals’ ability to assess and make property valuations.

To the reading of a lay audience or property professionals with only a passing understanding of valuations, the decision of the latest meeting of – to give the think tank its correct name – the RICS Material Valuations Uncertainty Leaders Forum – may seem counter intuitive.

But the counterpoint of those qualified and experienced in the professional valuations discipline is that MUCs have always had a validity. Albeit that validity is limited and only applicable in certain, exceptional circumstances where the evidence or, indeed, an absence of evidence points to the inclusion of an MUC in a valuation following rigorous due diligence.

Not all valuations require evidence.

Admittedly, while acknowledging a degree of uncertainty in certain sectors, such as leisure, hospitality and prime retail, there have been transactions during the past 10 months which have continued in the face of very difficult circumstances.

Fortunately, for those professionals operating in the industrial sector – which has continued to perform strongly set against the lack of available stock – there is, relatively speaking, a solid body of evidence based on market conditions.

Deploying MUCs as a simple default position when and where evidence exists and when trends can be demonstrated simply because of pandemic-induced business lockdowns – whether en masse or in tiered phases – cannot be justified.

While the wholesale use of MUCs cannot be supported there will be presently – just as there have always been – some cases in which their use is justified in reflecting the evidence and the particular attributes of the property asset and its position in the market at that specific point in time.

The guiding principle of the discipline and the practice of valuations is that there should not be a blanket ‘who knows’.

For any registered valuer to reach the conclusion where an MUC is inserted in a valuation, it means that the decision has been reached only after due diligence has been carried out.

The MUC accompanying the valuation in this instance will then have been based on the lack of available evidence to support a value predating the current economic turbulence.

What any professionally qualified valuer cannot be sure of is the performance of future values and it is incumbent on professionals to recommend to interested parties that some property types are kept under more frequent review.

For more information on valuations services, see https://eddisons.com/services/valuations/valuations-quick-guide