10 JUL 2020
Under lockdown, residential valuers have had to do their job without physical inspections. In the sixth part of our special series, we ask how this, as well as a drop in the number of transactions, has affected the way they work.
For the vast majority of buyers, the ability to visit a property is a vital part of the house buying process, something that was practically impossible for the two-month period from late March when estate agents in the UK were forced to close their doors as part of lockdown. The same was true in countries across the world.
Of course, the lockdown also provided a major challenge for those whose job it is to value residential properties. Supported by regular guidance notes from RICS and advice from a dedicated leaders forum coordinated by the regulator, however, residential valuers have managed to keep on working throughout the pandemic. “We haven’t stopped valuing in any sector, whether commercial or residential,” says Richard Petty, head of UK living advisory, at JLL.
In order to do so, valuation agents have had to find new ways of working. “We’ve had to work very hard [in order to] do a valuation without inspection, either with Skype calls, virtual walk arounds of buildings or static photos being provided,” says Jonathan Stickells, partner at Cushman & Wakefield.
“From a residential point of view, the point there is that you are going into somebody’s home. People are feeling very vulnerable and they don’t want strangers coming into their houses. Even with PPE, there was a reluctance from some clients to let us in. That was very challenging, particularly at the beginning stages of lockdown.”
Then there is the issue of what the lack of a physical inspection means in terms of the banks’ willingness to lend. “What we found was that before they were willing to lend the money, the banks still wanted us to physically inspect and confirm what we had said in the report,” says Stickells. “They would take it to the credit stage, to the brink of lending the money, but they still wanted that confirmation.”
Petty says that in his experience the banks have been willing to take things on a case by case basis – in stark contrast to the situation during the global financial crisis of 2008 – although he admits the situation varies. “As a generalisation, the banks have been very supportive and understanding of the need to adjust instructions to reflect the restrictions we’ve all been under,” he says.
“In some sectors, an inspection is far less important than in others. If you think about situations where you’re really valuing an income stream, such as affordable housing or student accommodation, the inspection is less important than with a £50m central London townhouse. The lenders have been really good about saying they appreciate what they’re actually lending against.”
While the market appears to be improving, the low level of transactions during lockdown was also a big problem when it came to valuers having total confidence in their judgements. “In a market where there have been few transactions, how do we as valuers sign off on a number that we are 100% happy with? That is extremely challenging,” says Stickells.
“At the beginning of the lockdown there were the embers of what had been happening in January and February. Some of those deals rumbled on and were still happening into March and into April. So, we had an indication of the market. But there was a nervousness about where pricing will be when we come out the other side.”
Spending even more time than usual talking to agents and investors to get a sense of market sentiment was obviously part of the solution, but so too was doubling down on internal checks and balances, according to Tom Barton, director in the residential valuation advisory team at JLL
“We obviously have a peer review system and very often now, instead of one independent director on it, we will have two, to just check if it makes sense in terms of the tone of the evidence, to try and level out the peaks and troughs,” he says. “We’ve always had peer review but we have beefed it up.”
For Petty, the leaders’ forum convened by RICS has also been invaluable. “One of the features of the crisis is the degree of collaboration between valuation firms in sharing comparable evidence,” he says. “The spirit of openness in that forum has been fantastic and has enabled us to make informed decisions.”