Location, location, locationThursday 9th February 2012
The maxim for property value since time immemorial has been challenged over the last three years. The Levene Group has always advised clients that ability to proceed with a project or purchase depends upon finance being available but it is only in recent times that Finance, Finance, Finance has become paramount as the most important property maxim.
From the sanctified atmosphere of a valuation office we overhear several times every day our agents in Levene Commercial and Levene Residential pressing their customers to “show them the money” or, in the more courteous Levene professional jargon, “I am afraid sir that before I can arrange for you to see the property again or convey an offer to our client I must be satisfied that you either have the funds to be able to proceed or there is a high likelihood that you can obtain such funds”. More time is being spent than ever before seeking funds for often very low risk property investments.
Whilst only a small part of the wasted time and effort expended by estate agents, purchasers, vendors, intermediaries, brokers and packagers can be laid at the door of the valuers, it is a truism that some are concerned at the lack of confidence and experience of some valuers in appropriately assessing property values expeditiously and correctly. They are suffering the consequences in struggling to justify their support for over-aggressive valuations in the past but many small developers and estate agents see valuers as now adversely affecting property transactions. The reputation and credibility of their profession is at stake.
Providing substantiated but not overly conservative valuations in an expeditious manner to lenders – particularly the bridging and finance companies which are in the vanguard of keeping the property market alive – will help the property market recover, assist the economy and improve the well being of many. It can be difficult for short term finance companies to assess whether their borrowers will have an exit available.
At Levene we see it as a duty of the valuer to advise if an exit is considered unlikely to be achievable or, for properties let out or to be let out, if we anticipate poor rental returns in the near future. However, rising rents on buy to let properties is helping.
We have noticed that some managers in branches of the high street banks try to help their customers through the difficulties by advising them to prepare new leases to their own companies so that they can recommend the loan. This technique can only sometimes smooth the process past their own credit control teams to indicate that the rental income is sufficient to meet the mortgage repayments. Valuers need to be wary but not overly cautious and at Levene we always consider, if appropriate, rental valuation of property rather than relying solely on sale comparable evidence notwithstanding that yield can vary considerably depending on the quality of the covenant and specific location.
Valuations should be accurate rather than conservative to ensure necessary capital can be made available as and when required. With pro-active participation in an effective independent manner the target is for Chartered Surveyors to be once again regarded as the property professionals that can be relied upon rather than merely a short step ahead of Zoopla and Mouseprice.
After that rant some market comments:
- Retail occupancy and rents increase in prime areas while they fall in less valuable locations. There is a north-south divide (or rather Greater London and the rest) but there are pockets of successful malls outside Greater London and weakness in some tertiary locations within Greater London.
- Prime London office and retail markets continue to absorb supply in a virtuous circle of increasing occupancy leading to increased demand. Arresting the downwards spiral in some secondary and tertiary areas is problematic but a floor is being formed even in some of these areas.
- Savills auction (primarily residential) on September 19 2011 appeared to be a resounding success, with sales prices generally significantly above guide prices. Upon further analysis it is clear that many of the guide prices were considerably below market values and the results do not show that prices achieved are greater than would have been achieved by estate agents offering by private treaty. Given the time often required for obtaining finance, the contrary is true although some cash buyers are showing increasing confidence that property is again becoming a better haven for money than more liquid investments.
Article supplied by
Robert Pendleton, FRICS CEnv
RICS Registered Valuer & RICS Registered Business Valuer
Mobile 07722 485 663
Office Tel 020 8977 6886
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