I don’t expect too many hands to be raised. For clarity, this is not a vaccine or antibody, it’s a rarely used or indeed rarely read section of the Royal Institution of Chartered Surveyors (RICS) valuation standards.
For anyone lucky enough to get a quiz question on this, it has only been enacted on a handful of occasions. The global financial crisis and the Brexit referendum outcome being two recent occurrences.
Although it’s importance really grew as a result of a recent Financial Conduct Authority (FCA) rule change around fund valuations, it existed very much under the radar in the residential space – that is until Covid-19 hit.
What is VPGA10?
Essentially, it’s a clause which allows valuations to continue when markets are particularly uncertain. Although, it’s also fair to say the housing market inherently displays many types of uncertainty and the skill of the valuation profession is interpreting markets and valuing accordingly.
The key point here is that activating this clause allows valuations to continue. The trigger to the March 2020 declaration of the clause was the national lockdown which resulted in the inability to inspect properties and the subsequent stagnation in transactions.
As markets began to normalise, the uncertainty clause was lifted but it’s important to reflect that waiting for a market to return to pre-uncertain times would be an inappropriate course of action.
The point is that a market is no longer materially uncertain once sufficient certainty returns to the pricing point.
How will government support impact the market and generate certainty?
I suspect that furlough is a term very few of us had heard of before 24 March 2020 but it has become an intrinsic part of our vocabulary. It has performed a vital function in supporting workers, businesses and whole industries.
While the number of furloughed staff remains high, it has reduced steadily since the first lockdown. Despite this, the housing market has remained strong.
However, as we are nearing the end of the furlough support scheme, this raises the question of whether this will result in reduced activity?
Will the market remain unchanged? How might the end of the stamp duty exemption affect this? We can’t be sure.
Should these uncertainties be enough to enact a VPGA10?
In a word, unlikely. These are classed as known, knowns and not a significant unknown event coinciding with the valuation date which is a core part of material valuation uncertainty.
The unknown is the impact on the market and will it lead to a period of increased market uncertainty but valuers are skilled at interpreting this and market uncertainty doesn’t necessarily result in material valuation uncertainty.
This highlights how important it is to accurately report and use material valuation uncertainty declarations only when appropriate.
As a leading surveying firm, it’s our job to closely monitor activity and influencing factors while working closely with bodies such as RICS.
Countrywide Surveying Services has a dedicated technical and risk functionality to ensure that the valuation process accurately reflects the market.
Nobody can know exactly how the market will react but insight and expertise will allow the best surveyors to stay ahead of the game.