18 Aug Valuation Changes in H1 2020 – Daniel Owen-Parr
How has your experience as a Panel Manager changed since pre-COVID-19?
A lot changed in a short space of time, as you can imagine, and we needed to make sure that everyone felt supported. At VAS Group, we made the early decision to suspend physical valuations to protect our clients and valuers. We then adapted to desktop valuations. This process involved educating the lending market on the pros and cons of using them, for example, a positive we saw was their ability to keep the market moving during difficult times. Also, we needed to make sure that when the restrictions were lifted, valuers would prioritise going out and completing a physical inspection on these properties.
We also knew from previous experience – from the 2008 credit crunch, Brexit and the December election – that we needed to make communication with our valuers and lenders our number one priority. There was more specific support for our lenders around what the RICS guidance was and what this meant for them. We also made sure people understood that valuing a property is an art and not a science and that things weren’t going to be the same as they were in a pre-COVID environment.
How effective have you found desktop valuations?
At VAS, we have found desktops valuations very effective at keeping the market moving during these times. It took a little time to get up to speed with them and for both valuers and lenders to get comfortable. However, they certainly have served their purpose during challenging circumstances and shown how well the market can adapt to change. It also reinforced how much can be done with technology today and that there is more opportunity in this area.
Would you do things differently if there was the possibility of a second lockdown?
I don’t think anything would be done differently if there were a second spike, but a second lockdown would give us some time to consider the longevity of desktop valuations and would mean that the systems and processes developed after the initial outbreak could be refined, developed and ultimately improved upon.
During the earlier stages of lockdown, what were some of the difficulties you faced and how did you overcome these?
We started physically viewing properties after lockdown restrictions were eased but this was still our biggest challenge. We needed to navigate around new guidelines on PPE, something most of us didn’t have any experience with. We had to make sure we had the right equipment in place and ensure our valuers were aware of what safety measures they should take on site.
Furthermore, we had to manage various expectations across the market. As the pandemic hit and uncertainty arose, there was a rush to get projects finished and everyone was forced to adapt to change quickly. We had to make sure we were offering as much support as we could to all of our clients during these unexpected times.
Are you able to comment on the COVID-caveat on valuation reports and how this is going to impact the market?
Valuations rely on transaction evidence which support the valuer’s opinion. If there is a lack of transactions – as there have been in some sectors because of COVID-19 – then this increases valuation uncertainty as the valuer has to rely more heavily on their own experience and anecdotal views. As a result, the valuer is required to include the caveat clause. The RICS recommended that the clause was added across the board at the height of the pandemic in the UK but, in recent weeks, has started to suggest sectors of the market where it is no longer required.
In terms of impact on the market as a whole, where the clause is included in the valuation is up to lenders to decide on their appetite for risk. Some lenders may adjust their LTVs to reflect the risk but similarly, some may be able to make themselves comfortable based on the fundamentals of a specific asset.
What positives have you seen arise during lockdown?
Lockdown has given us, and I’m sure, plenty of others, time to plan for the future. Not only this, we’ve found operating remotely much easier than we initially expected; Microsoft Teams has been a god send! Also, working from home has meant that there has been a greater emphasis on communication and the support we provide our clients during these difficult times.
How do you think the market is subject to change in the remainder of the year?
I think a number of things are likely to change in coming months:
- Pricing is likely to change and as always, will be dependent on traditional indicators such as size of property and location. However, the situation of the wider economy will also have a big effect on pricing; interest rates, stamp duty, taxation and unemployment.
- Inevitably, there will be a shift away from commercial retail properties and office space as these sectors have seen a decline since the outbreak of COVID-19.
- There is expected migration out of the city centres to the suburbs. This will be fuelled by more people working from home, more flexible working capabilities and a desire for more open spaces.
I think there is still a lot money in the market, and property still seems to be the go-to place for a lot of investors. If a property is in a good location; is also in a good condition, then there will still be plenty of people who are looking to move.