The Coronavirus has undoubtably changed the lives of every person in the United Kingdom and the challenges caused by the pandemic to the property sector, specifically valuation services, may impact on the market for some time to come.
Valuation is the practice of estimating the price a hypothetical buyer would pay to a willing seller at a given point in time. There are many factors that go into establishing price otherwise known as market value including the identification and adjusting of recent similar sales (comparables) and establishing if any uncertainty surrounding the property or the market may affect its value.
These assessments of market value are carried out by Royal Institution of Chartered Surveyors (RICS)
registered valuers and represent one person’s opinion at a specific point in time and are accordingly subjective in nature. All valuations have a degree of uncertainty and it is the skill of the valuer to identify, quantify and disclose these uncertainties wherever possible.
However, there comes a time when the level of uncertainty goes beyond the norm and this is known as material uncertainty. Material uncertainty is defined in the RICS Red Book Global Standards as, “where the degree of uncertainty in a valuation falls outside any parameters that might normally be expected and accepted” (VPS 3.2.2(o)). With the UK Government not making any long term economic or political plans, as well as putting into place unprecedented support packages including the Business Interruption Loan Scheme and the Coronavirus Job Retention Scheme, Coronavirus meets this definition of material uncertainty and could therefore have an impact on the value of property.
In a statement released by the RICS on 2 April 2020 regarding the impact of COVID-19 on valuation, it stated that, “if an RICS Regulated Member concludes that declaring material uncertainty is not appropriate, there should be a sound rationale to explain the decision-making process and this should be recorded for future reference”. It goes on to state that, “in considering the degree of uncertainty at a specified valuation date, careful regard should be had to the level of activity in the relevant market and the existence, and degree of reliability, of recent or contemporary evidence”. Whilst the decision to disclose or not disclose material uncertainty lies with the valuer, it must be explicitly stated in the valuation report if it is.
What is Christie & Co doing?
Christie & Co continues to be the market leader in our specialist markets. Our market expertise places our valuers in the best possible position to determine whether to report material uncertainty to clients. The strength of our brokerage teams means that we are uniquely placed to offer clients well informed, considered advice and only if appropriate, will values will be adjusted to reflect any material uncertainty in the markets, caused by Coronavirus, which will be explicitly stated when reporting.
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