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Review of Real Estate Investment Valuations

Review of Real Estate Investment Valuations

Responding to feedback and rapidly changing market dynamics, the RICS Standards and Regulation Board (SRB) commissioned the Valuation Review in the public interest to futureproof practices in the valuation of real estate assets for investment purposes. The SRB accepted all recommendations from the review put forward by the review chair Peter Pereira Gray. View the review report here.

The review recommendations are being implemented by the Valuation Review Implementation Committee (VRIC), a dedicated sub-committee set up by the SRB, alongside an RICS programme board and an implementation roadmap has been published.

Feed into the live public consultation here.

  • Latest Updates
  • Committee Members
  • Frequently asked questions

Latest Updates

Public consultation launched on proposed changes to UK regulated purpose valuation practice 

To progress recommendations from the valuation review we have launched a public consultation on the RICS Red Book UK Supplement. The consultation seeks feedback on proposals for a time-limited, mandatory rotation cycle for regulated purpose valuations, proposals to ensure an orderly transition to the policy, and proposals to standardise governance and prevent conflicts of interest in the commissioning and receiving of valuation reports. Feedback should be submitted before the consultation closes on 14 December 2022.

An orderly transition to any new regulatory arrangements and standards is essential so the proposed transition policy, which is subject to this consultation, seeks to provide clients with a reasonable timescale to transition, with changes proposed to come into effect and be mandatory by 1 October 2023.

It is intended that once feedback from this consultation has been received and carefully reviewed, the wording of any changes will be finalised and approval of the terms will be sought from the RICS Standards and Regulation Board.

Share your views

Past Updates

  • To give clarity on the programme and the process for implementation of the recommendations from the valuation review report, we have prepared a Roadmap.

    Download review implementation roadmap

    The input of the profession and its stakeholders has shaped this review since 2020, and consultation with the market will continue to develop specific reforms from the review and ensure the best possible outcomes in the public interest.  

    If you want to be involved and would like to be contacted about opportunities to help inform the implementation express your interest

    All changes to standards or regulatory policy recommended by the Committee will be considered by the SRB, who will decide which changes to approve.

  • RICS is taking action to future-proof practices in the valuation of real estate assets for investment purposes in the public interest.

    A dedicated sub-committee of the independently led Standards and Regulation Board (SRB) will oversee the development of specific reforms to implement all recommendations from the Valuation Review in a staged approach over the next 18 months.  The committee will be chaired by Richard Waterhouse, FRICS, a senior chartered surveyor, and member of the SRB. The initial focus for the implementation programme is on standards and practice issues and we are seeking views on proposals to introduce mandatory rotation of valuation firms and the introduction of new governance arrangements for the commissioning and receiving of valuation reports to inform an update to the UK supplement of the Red Book.

    The input of the profession and its stakeholders has shaped this review since 2020 and we will continue to seek feedback from the widest possible audience through implementation to ensure the best possible outcomes in the public interest.

    To canvas industry stakeholder opinion on what currently works within the UK supplement of the Red Book and what may need to be updated or removed in light of the recommendations, RICS ran a ‘Call for views’ from 11 April to 20 May.

    RICS will now be forming Expert Working Groups to assist in updating the different sections of the UK Supplement. If you would like to express an interest in joining a group, please email standards@rics.org. RICS aims to formally consult on the updates in Autumn 2022.

Committee Members

Richard Waterhouse, FRICS – Chair of Valuation Review Implementation

Richard is a Chartered Surveyor by career, joining the RICS Standards and Regulation Board in March 2020. Richard has extensive public sector experience within the land & property markets, developing and driving policy across residential, commercial and infrastructure. He has served across several departments including, Communities & Local Government, Cabinet Office, HMRC and Treasury and in areas including litigation, policy development, risk & assurance, and introduction of new legislation. He also maintains a keen interest in the historic property, environmental conservation, lithics and kayaking.

More widely, he holds judicial office as a Valuer Chairing London, on the First Tier Tribunal (Property Chamber), dealing with residential disputes, and teaches valuation at the University College of Estate Management.

The Valuation Review Implementation Committee draws expertise from a range of stakeholders and across a full spectrum of members and firms. Members include:

  • Sara Ensor MRICS, EMEA Head of Risk & Compliance – Valuation Advisory, JLL
  • Ian Hardman MRICS, Head of Risk Management, Colliers
  • Mark Fox MRICS, Director, Foxglove Property Consultants
  • Jonathan Theobald MRICS, Derwent
  • Roy Albert MRICS, Lead Surveyor, Valuation Office Agency
  • Nick French FRICS, Chair RICS Global Valuation Standards Expert Working Group
  • Leigh Miller FRICS, Global Conflicts Leader, Ernst & Young LLP
  • John Boulton, Director Policy, ICAEW
  • Rod Lockhart, CEO, LendInvest

Frequently asked questions

About the Valuation Review

  • The Valuation Review was commissioned to future-proof practices in the valuation of real estate assets for investment purposes, as a result of feedback and rapidly changing market dynamics. There are structural shifts in investor and occupier demand for real estate – many accelerated by the impact of the pandemic. The RICS Standards and Regulation Board asked the Review Chair to examine the way valuation of real estate assets for investment purposes are conducted and make recommendations to ensure valuations remain relevant and trusted.

  • The Valuation Review has been largely UK-focused, where RICS is the principal professional body and regulator of property valuation. However, it has also addressed global standards and assurance issues where appropriate, reflecting RICS’ role in upholding compliance with its standards by members around the world.

  • The initial evidence gathering for the Valuation Review looked at all aspects of valuations of property assets for investment purposes, but the Valuation Review has primarily focused on valuations of real estate assets for performance measurement and decision-making purposes, upon which third parties place reliance. These are principally valuations for:

    • financial reporting
    • inclusion in prospectuses and circulars, and takeovers and mergers
    • collective investment schemes
    • unregulated property unit trusts
    • commercial investment property financing.

    You are advised to read the full Review report findings to provide a clear understanding of the recommendations. The Executive Summary provides an overview.

    The SRB hope that members, regulated firms and stakeholders alike, will welcome the findings in the Valuation Review.

About the recommendations implementation

  • RICS and the Valuation Review Implementation Committee are developing specific reforms from the review to future-proof practices in the valuation of real estate assets for investment purposes in the public interest. The implementation programme has been split into five key workstreams that ensure recommendations have been fully analysed and considered. These workstreams include:

    1. Valuation process and methodology
    2. Professional assurance and governance
    3. Education and professional development
    4. Diverse and inclusive profession
    5. Global valuation standards adoption

    You can find out more on these workstreams, the process for implementation and key dates for your feedback in our implementation roadmap.

    The input of the profession and its stakeholders has shaped this review since 2020, and consultation with the market will continue to ensure the best possible outcomes in the public interest. If you want to be involved and would like to be contacted about opportunities to help inform the implementation, express your interest.

  • All changes to standards or regulatory policy are subject to approval from the Standards and Regulation Board. We endeavour to ensure all dates mentioned in the roadmap are met and if there are any changes, they will be communicated.

  • The Quality Assurance Committee has been classified as Grade B according to the new Global Appointments Model for appointments, approved by the RICS Nominations and Remuneration Committee. This enables the committee to have an open recruitment exercise for Chair and members of the Committee, and once it is being put together the positions will be advertised on various channels. Appointments will be made via an Appointment Panel.

  • The Valuation Review report recognises and endorses the role of RICS and its Standards and Regulation Board in regulating valuation with independent oversight. It acknowledges the progress that the profession has made by introducing Valuer Registration and embedding it over the past ten years. To drive the highest possible quality of professional practice, the Valuation Review report suggests that, for the highest public interest valuation purposes, assurance should be further enhanced and strengthened. This points to changes, not just in the standards but also in the approach RICS takes to monitoring and assurance delivered through the Valuer Registration scheme and through our firm based regulatory assurance.

    The Standards and Regulation Board has indicated in their response that resultant changes to the RICS standards and regulation framework will be implemented over an appropriate timeframe with regular engagement with stakeholders on progress.

  • Ensuring there is more clarity and transparency in the use of valuation methods was an important conclusion of the valuation review and remains a key objective of our work to future proof practices and ensure confidence remains in real estate investment valuations.

    In achieving clarity and transparency, the Red Book directs that the valuer should use their professional judgment when considering the appropriate valuation method(s) in undertaking valuations.  In determining that method, it is recommended within the Review that when undertaking property investment valuations, valuers appropriately consider the use of the Discounted Cash Flow (DCF) method. 

    We received feedback from those who contributed to the review, that strengthening the guidance around discounted cash flow (DCF) will be beneficial. Therefore, RICS will develop this to provide greater transparency and support valuers to be more explicit in their assumptions. We will also develop training on the appropriate use of DCF and update the RICS Valuation – Global Standards “Red Book”.

    RICS will consult on the DCF guidance later this year and will seek feedback from the widest possible audience across the market and its stakeholders to ensure the best possible outcomes in the public interest.

  • The Valuation Review has primarily focused on valuations of real estate assets for performance measurement and decision-making purposes, upon which third parties place reliance. Where this affects small and medium-sized firms, the Standards and Regulation Board will take a proportionate approach to ensure that SMEs are not subject to inappropriate regulatory burden, adopting a right-touch approach commensurate with risk.

About the Red Book UK Supplement

  • Changes are being proposed to UK VPS 3 of the UK National Supplement of the Red Book to deliver key recommendations from the Valuation Review to future-proof practices in the valuation of real estate assets for investment purposes in the public interest. Specifically, the proposed changes relate to a time-limited, mandatory rotation cycle for regulated purpose valuations, proposals to ensure an orderly transition to the policy, and proposals to standardise governance and prevent conflicts of interest in the commissioning and receiving of valuation reports.

    In addition to making these amendments related to the Valuation Review, RICS is also using this opportunity to make various technical updates in respect of its public sector, financial reporting and residential valuation content in order that valuation professionals can continue to respond to the needs of clients in these areas.

  • The proposed changes for consultation concern those involved in instructing or undertaking regulated purpose valuations upon which third party reliance is placed, such as for financial reporting, takeovers, and collective investment schemes. Feedback from this consultation will be carefully reviewed and the wording of any changes will be finalised and approval of the terms will be sought from the RICS Standards and Regulation Board.

  • It is intended that once feedback from this consultation has been received and carefully reviewed, the wording of any changes will be finalised and approval of the terms will be sought from the RICS Standards and Regulation Board. Any update to the Red Book UK Supplement is proposed to be published in Q1 2023 and come into effect by 1 October 2023.

  • An orderly transition to any new regulatory arrangements and standards is essential so the proposed transition policy, which is subject to this consultation, seeks to provide clients with a reasonable timescale to transition, with changes proposed to come into effect and be mandatory by 1 October 2023. RICS will also develop appropriate materials to support clients in commissioning and receiving valuation advice.

  • The proposed extension has been included in the consultation draft with the aim of providing a reasonable timescale for clients to make an orderly transition to a new valuation advisor. This would reduce the risk of disruption in the market from a large number of rotations being enacted around the same date. The proposal is currently subject to consultation until 14 December 2022.

  • Clarification has also been sought from public sector stakeholders as to whether the UK VPS 3 “regulated purpose” definition includes public sector assets. Further to this feedback regulated purpose valuations relating to public sector assets have been included in the proposals for consultation draft, but only in respect of investment property valued at fair value using IFRS 13.

  • The proposed changes to UK VPS3 are driven by the recommendations in valuation review. Peter Pereira Gray’s report made special mention of the necessity to ensure that any changes did not unfairly impact SMEs operating in this area of work. RICS has engaged with SMEs to understand potential impacts and encourages representatives from SMEs to provide feedback via this consultation. 

Contact

  • Should you have any questions related to the review that are not answered on this page you can email: standards@rics.org

“The Valuation Review is an extensive and thorough examination of the way commercial property works around the world – and its findings have shown that reforming part of the valuation practice across our education, regulation and standards will be vital for the sector to remain trusted and relevant.

“We are taking action to implement all the recommendations and I thank colleagues on the SRB and at RICS for asking me to lead this important work.”

Richard Waterhouse
FRICS – Chair of Valuation Review Implementation Committee

Richard Waterhouse

Archive

    • Peter Pereira Gray, Chair of the Review
    • Expert Advisory Group
    • FAQs

    Peter Pereira Gray, Chair of the Review

    Peter Pereira Gray, BSc (Hons) DipPropInvest FRICS, FRSA

    Peter has developed an extensive understanding of valuation practice after being involved in commissioning and receiving such services over the last thirty-five years in his role in the property investment sector.

    Currently acting as the Managing Partner and Chief Executive Officer of the Investment Division of the Wellcome Trust, Peter also sits on Wellcome’s Valuation Committee. Alongside this he is the co-chair of the Institutional Investors Roundtable, a body representing approximately $14 trillion in assets across the globe.

    Prior to joining the Wellcome Trust, Peter was Deputy Life Fund Manager and a Director in the property fund management division of Prupim, at the time one of the UK’s largest institutional property owners (1988 to 2001).

    I commend the RICS Standards and Regulation Board for commissioning this objective and transparent review and for accepting all of the recommendations. It is my belief that implementing these recommendations as a package will lead to a greater and more enduring trust in the work of RICS Registered Valuers

    Peter Pereira Gray, BSc (Hons) DipPropInvest FRICS, FRSA
    Chair of the Review

    Expert Advisory Group

    The Review was supported by a panel reflecting a range of expertise from different sectors, selected by the Reviewer.

    Expert advisory group members

    • Michael is the Chairman of the UK Advisory business of CBRE and joined CBRE’s investment team in 1981, running the Valuation department between 1999 and 2018.

      He has had a wide range of Non-Executive roles including the Policy Committee of the British Property Federation and the Bank of England’s Commercial Property Forum, IPD (now part of MSCI).

    • David is a Chartered Accountant with over 17 years’ experience working in commercial, operational, audit and advisory functions in the corporate and not-for-profit sectors. He is currently a Director at the Institute of Chartered Accountants in England and Wales. Prior to this role, David was a valuations specialist at a Big 4 firm.

    • Sarah has over 35 years’ experience in the City and in the investment management industry, including roles as Chief Investment Risk Officer at RBS Asset Management (and formerly at Coutts) and, most recently, Head of Risk at The Wellcome Trust, where her role spanned investment and operational risks.

    • Paul is the Head of Strategy and a Portfolio Manager for European Real Estate at JP Morgan Asset Management. He serves as a voting member of the European Investment Committee and a member of the group’s senior leadership team.

      Paul has served as Head of Private Markets Strategy for the Abu Dhabi Investment Authority (ADIA) and worked for Invesco Real Estate as a Senior Director and Co-Head of Global Research.

    • Currently the Executive Chairman and CIO of PineBridge Benson Elliot, Marc Mogull is also a Senior Fellow in Land Economy at the University of Cambridge and the Chair of the Bank of England Commercial Property Forum. Previously he has held executive/investment roles with Doughty Hanson Real Estate, Goldman Sachs, the EBRD and JMB Realty. He is also a member of the MHCLG/BPF and RICS Commercial Property Forums, and is the co-creator of the Honor Chapman Memorial Lecture Series.

    • Timothy is a planning, environmental and public law specialist. He has over 30 years’ experience of practice in the field of compulsory purchase, land compensation and rating. Prior to taking silk in 2006, he was standing junior counsel to the Inland Revenue on rating and valuation.

    • Isobel O’Regan FRICS FSCSI has been in practise for 35 years and is currently with Savills based in Ireland.  The majority of Isobel’s professional career has been in the area of professional services. Isobel is also currently a member of RICS Governing Council and holds the strategy seat for Valuations and Capital Markets.

    • Michael Prew is as senior Equity Research Analyst at Jefferies LLC based in London heading the Pan-European Real Estate and covering 30 UK REITs with 30 years' sell-side experience. He holds an honors degree from Imperial College in Mechanical Engineering and a master’s degree from its Business School.

    • Sandra is Chief Investment Officer, Chief Executive Officer, and sits on the Board of Oxford University Endowment Management Ltd (OUem). As Chief Investment Officer, Sandra has discretion for all investment decisions and as Chief Executive Officer, she is responsible for overall strategy of the business and ensuring the success of the company.

    • Becky is Chief Financial Officer at Canary Wharf Group. Becky qualified as a chartered accountant with PriceWaterhouseCoopers and has over 20 years of experience in finance with extensive knowledge of the real estate market.

    FAQs

    FAQs

    • Peter Pereira Gray was appointed by the RICS Standards and Regulation Board to lead the Valuation Review. The Review was supported by an Expert Advisory Group (EAG), which reflected a diverse range of expertise from different sectors, chosen by Peter Pereira Gray. The skills of those on the on the EAG included valuation, real estate, regulation, financial services, investment analysis and academia.

    • The independently-led RICS Standards and Regulation Board (SRB) provides oversight of RICS’ core public interest functions such as standard setting, entry to the profession and regulatory processes. The SRB commissioned the Valuation Review and asked the Chair of the Review to deliver recommendations to ensure valuation of real estate assets for investment purposes remain relevant and trusted. The SRB has received the final report and accepted all the recommendations for the Valuation Review and will now implement necessary programmes of work, with input from the profession and its stakeholders, to plan the implementation of the Review’s recommendations.

    • A dedicated RICS staff team provided project coordination and secretarial support to the Valuation Review. The recommendations and the report resulting from the Valuation Review are solely the opinions of the Chair, supported by advice from his Expert Advisory Group and the evidence gathered.

    • Over 180 responses were received to the Call for Evidence from a range of stakeholders. Some of the individual responses represented large multidisciplinary firms that employ hundreds of valuers. Responses were also received from smaller organisations and sole traders. The majority of responses were from valuers, with lenders, professional bodies, and regulators also submitting responses.  More detail on the respondents is published from page 56 of the report, including a list of firm names.

  • RICS Standards and Regulation Board Chair, Dame Janet Paraskeva