The conflict in Ukraine, rising commodity prices, supply chain challenges and of course rising interest rates; rising somewhat a little faster more recently than had been expected.
The art part of valuation really comes to the fore in times like these. The skills we have allow valuers to interpret market events. We use the widest range of information available to then decide and advise the client on the all-important pounds, shillings and pence, and label it as value.
But casting our minds back to the immediate aftermath of the Covid lockdown, when the world closed down and material valuation uncertainty was declared. Are we at the same point in the valuation journey? Are we in materially uncertain times or is it just that the market is uncertain, and merely reflecting what markets do?
That is to fluctuate and reflect what is happening around it. After all, markets are rarely certain.
A rare occurrence
To declare material valuation uncertainty is a significant event in itself, let’s not be under any illusion; it has rarely happened at all since the valuation rule book was created. It is a powerful tool in the valuer’s armoury but equally it is a very powerful statement, in both the positive and the negative. Possibly a tempting safety blanket but its use must be appropriate to the circumstances and introduced only after careful consideration and, dare I say, with much caution. Sometimes markets react in ways even the most informed would find unusual.
So, where are we? Materially uncertain or just uncertain?
To a large extent, the answer lies in the definition of material valuation uncertainty – which is essentially a significant market disruption from unprecedented and unforeseen events, whose occurrence coincides with the valuation date, creating a lack of empirical data leading to a sufficient and significant lack of certainty around the valuation figure.
A global pandemic and global lockdown were significant and unforeseen. They coincided with the valuation date and the evidence used within a valuation journey in March 2020 came from a different time and market. A time when the markets were operating freely, without restriction and without uncertainty – few could predict whether the exit pricing point in March 2020 would be the same as the entry pricing point when the markets were allowed to reopen.
On that basis, I would suggest, not many would disagree that events in March 2020 created material valuation uncertainty.
Current market conditions
Are we in the same type of territory now? Let’s step back to evaluate this thoroughly. The market is open, it is fully functioning, finance is available, property continues to transact and a supply/demand imbalance still exists.
We are indeed in uncertain times but is it material in the valuation sense?
My view is no; events have not created a materially uncertain market. Markets are inherently uncertain, markets rarely follow a consistent and constant path and that is what we are seeing now, an uncertain market, just on a larger scale. And as said earlier, it is when markets fluctuate (which they do) that the valuation profession is needed more than ever.
At Countrywide Surveying Services, we are continuing with our holistic, wrap-around support to all our clients, helping them to navigate through these unusual times.
We are providing the best advice possible to ensure the valuation is the right one from the right type of valuation product and that the all-important pounds, shillings and pence, are reflective of the true value of the asset. After all, this is what we are here for – to value as at the date of valuation using the widest range of information available.
That way we also continue to support the market, to reflect the market and most importantly, not to cause unnecessary disruption or uncertainty.
