Valuing in good times?

I spoke at the Geldards property conference on Friday  – worryingly I was between the delegates and their lunch! But they were well behaved and patient. You expect this of lawyers?

RICS logo

Trying to get across some complex constructs in 40 minutes is quite a challenge. The tile of the talk was a clue – “The black art of valuation”. Although we have a framework (The Red Book as an example) we also have a number of conventions (like Zoning shops). These aren’t written down – even in the Code of Measuring Practice.

There were a few raised eyebrows when my confession about the use of proper English measurements (“Metric is from France and so is Rabies” is the surveyors with grey hairs mantra).

The hardest part of the seminar was explain the use of yields in capitalising rents. Not specifically the mathematical element but how you arrive at a suitable multiple to reflect risk.

So often we hear the phrase that ‘valuation is an art and not a science” – although the method of getting to an answer needs a formulaic approach. But when the maths are done there is a necessity to step back and consider the figures. Experience is the part that is hard to explain. It’s the part where you take the figure and step back. You have to think about the number in the context of standing outside the asset to be valued on a cold winter morning in the pouring rain and asking yourself, “would someone really pay £1,000,000 for this?”

A sobering moment! But the real part of valuation!

In these improving markets it would be very easy to get carried away – but as we know – markets can go up as well as down!

About these ads

Social media and oil painting….

I was asked last month to write an article for the RICS Magazine ‘Modus’. This is the professional monthly update on all that’s happening in the world of property. The ‘naming bad boys bit’ is the best.

timgarratt

My point in the article was that social media is important in the world we live in. Twitter, blogs, Instagram and the like have a huge part to play in today’s business world. But some people disagree.

I view social media as an essential part of the marketing we do as a firm and I do personally. Google are clever enough to work out that it is content and refreshed content that attract people. If you ‘vanity’ google yourself it will give a clue as to how good your own profile is. If you have an unusual name it’s a bit easier – especially if you have a Facebook or LinkedIn account. But more common names are more difficult. My google rank for my name has been number one for the last four years or so.

I have struggled to find time sometimes for this blog – but it still gets lots of comment and gives me opportunities for further exposure and profile – both with local radio and TV and the national press.

The point about marketing is that you never really know what works and what doesn’t. If you did know you could save a lot of effort on the things that didn’t work. But generally we don’t – so we have to keep pushing and keep our profile ‘out there’.

The only issue with my article – the RICS though I looked better in oils and not in photo style – I’m not so sure!

Labour rent capping?

There is a major problem, in particular in London, for people who rent their homes. Many of them are reluctant tenants – they simply cannot get on the rising buyers market. It’s a major problem.

Print

Yesterday Ed Milliband announced that a Labour Government would intervene in the market – effectively placing a cap on rent rises. He wouldn’t interfere with the initial market setting – but would attempt to benchmark the uplift and then apply this notional figure in annual rises.

So in order to make this actually work he would need to alter the basic terms of an agreement. As now, a tenant would be able to terminate a tenancy after the first six months, with one month’s notice. A landlord could only do so with two months’ notice and if certain conditions were met – such as the tenant failing to meet their rental payments, engaging in anti-social behaviour or breaching their contract in other ways. After the six-month probationary period, contracts would automatically run for a further 29 months – so a total of 3 years.

Milliband has suggested the RICS were helping with setting the average rises – something that has been denied by the RICS. This seems a little sloppy. I do know from the Institution that they do not take political sides. The RICS is apolitical.

I think this is a poorly thought out policy.

I have sympathy with those renting – and the inexorable rise in rents. But this is partly as a result of a lack of supply – and the market sorts that out itself. We do have a number of policies to provide more accommodation in the private rented sector. There are millions of pounds being currently placed in the market. Enough to make a difference. These investors and developers could easily be spooked by rent caps. Historically they have not worked.

What will potentially happen is that there will be a reduction in the numbers of houses coming forward. The market hates Government intervention and Governments of all colours think they can buck the market. In the majority of cases they simply can’t.

How to survey a roof…

I have spent a fair proportion of my working life inspecting roof coverings! It can be a challenging part of the job.

DSCF4240

Sometimes it was a contractor who would meet you on site and he would announce with glee that access was via a triple extender ladder. The fire service would have palpitations at the Heath Robinson nature of these contraptions. Then of late we have powered access platforms – like something from Thunderbirds. Equally scary.

Recently a number of companies have set up using a telescopic pole to get a camera high above the ground – in fact these are really effective. They are however ‘fixed’.

If you are a techie person you may have noticed a new phenomena in the last year or so – that of quadrocopters. These gadgets allow a small camera – usually a GoPro underneath and have a flying time of a few minutes. They are a bit ‘flimsy’.

But, at the weekend, I was at The Photography Show at the NEC and saw some of the latest offerings.Two caught my eye – these can mount serious SLR cameras – the QU4D X – pictured is available now for a cool £8,500.

At this price point they are still an expensive tool but as the price drops it will perhaps soon be perfectly normal for surveyors to use these to gain ‘access’ to high points on buildings. Sure beats a long ladder on a windy day!

The RICS APC assessments loom – for the penultimate time.

Later in the week I head off to my least favourite hotel in the world – The Park Inn at Heathrow. I am assessing for the RICS – four candidates face their final hurdle to get into the Institution.

rics_logo_purple

I spent much of Sunday reading their documentation.

It will be a nerve wracking day for them – they get quizzed for an hour about their competences. They have a 10 minute presentation – which then gets interrogated. We need to know they have done the job – so the questions probe the detail of their chosen subject. I tell our candidates that they need to be under the skin of the job they did – leaving no stone unturned.

I have set out my tips previously.

I have one more set of assessments to do this year after Heathrow – in a couple of weeks time – regrettably these will be my last.

I have decided to handy up my boots on assessing. I have a number of reasons.

Firstly I am becoming increasingly concerned about the level of auditing of the assessors that goes on. I can accept that panels need to be audited to ensure that the questioning is consistent and fair – but I was chosen last week to be audited prior to the assessment to make sure the chairman of the panel had been in touch with me! This is administration gone mad in my view – and I have made my feelings known. I have refused to fill in the audit form.

There has also been an incident in which an auditor has resigned – I can’t reveal the detail – as it is subject to an internal RICS legal investigation. Suffice to say that I am disappointed in the way the matter has been dealt with to the extent that I am no longer prepared to support the process.

It’s sad really – I have enjoyed putting something back – and it has helped me with our own candidates, but I have other things I can do with my valuable time!

The end of the valuer?

My professional Institution (the RICS) has commissioned an independent inquiry to consider the challenges facing the UK property valuation profession and look at solutions. The inquiry will take evidence from a range of organisations working across the property sector including banks, building societies, insurers, panel managers, property valuers and their clients.

Following the inquiry a report will be produced based on the evidence with recommendations for all parties to help address the balance of risk and reward and maintain high standards in valuation which is a vital professional service that underpins underpinning economic stability and consumer confidence.

And that is the official blurb.

Print

So what is really happening?

Well, there are a number of firms who are now refusing to provide professional valuations. Some can’t as they haven’t applied for Registered Valuer status. But others are simply turning the work away. They consider that the risk reward profile is madness. Fees are incredibly low for the time needed to properly report with all of the due diligence ticked off. But then the cost of failure can be catastrophic.

we carry Professional Indemnity Insurance – the costs of which are rising as the Insurance market decides that we are too much of a risk!

We are coming to an interesting period where some valuations done in 2007/8 at the height of the market will be seeing some of the biggest falls in value. And the Banks are looking for someone to blame. Surveyors with a rich seam of PI Insurance are right in the line.

And this is the real reason why some valuers are turning their backs on this work. It simply isn’t worth doing …

Earlier in my career I recall a discussion about valuation – and the suggestion it is an art not a science. And part of that is a judgement – where we give an opinion. Sadly those days are gone – it is now closer to a science, it is an opinion with quite a lot of mechanical process – and certainly less and less of an art.

Market sentiment – on the up?

So Murray wins Wimbledon, the sun shines and I hear from more than one person that there is ‘more activity in the market‘. I’m not sure precisely what these words mean – more than what? activity is for burly blokes in the Army? But there’s some tails in the air. The agents are chipper.

IVB

The evidence doesn’t quite bear this out according to the Property Investor Bulletin for July. You can see from the graph that we are better than 2012, but still not as good as 2011.

But this is always the issue, valuers are always looking back – so, as the saying goes, we don’t make the market, we simply take the market. In fact, this situation is likely to start causing some issues over the next few months.

I have a situation where I have agreed to buy something but a third party firm have been asked to value for a Bank. They have down-valued by around 20% citing ‘evidence’ of past deals. The problem is that my client is prepared to pay a price and the vendor is willing to accept the same price – but no lower. In some ways that is the test of market value. But valuers have to watch their Professional Indemnity policies and there is no incentive to value up!

So this presents another issue – the threat of Insurance claims is holding the market down.

So, even if there is a green shoot (a horrible expression!) then it won’t necessarily be capable of being realised – as history still looks grim at this point!

Surveyors – looking up?

The latest survey or surveyors makes interesting reading…

rics_logo_purple

It seem we have more job security and observe business confidence and sentiment across the UK improving since last year.

In 2013, 28% of property professionals are anticipating an improvement in economic activity (up 11% from 2012), while negative business sentiment dropped to 13% (from 16% in 2012). Heady stuff indeed.

The results of the survey:

* The average UK property salary: £48,901 (+1.2% from 2012)
* RICS membership leads to higher remuneration, for example an FRICS earns £62,480 in comparison to a non RICS counterpart who earns on average £40,235 (or a 55.3% premium)
* 43% (versus 39% in 2012) of respondents received a base salary increase, while only 4% (down from 7% in 2012) received a base salary decrease.
* 39% (versus 32% in 2012) of respondents secured a bonus with an average bonus of £13,803 (versus 13,461 in 2012)
* 19% believe that their pay and benefits will be positively affected by market conditions in the next 12 months compared to only 13% last year.
* 62% (versus 57% in 2012) assess their job security as either strong or very strong.

It seems that there are improvements in sentiment – which must eventually translate into an improving property market.

Before we start…

The blog re-starts tomorrow proper. But I’m always interested in what you read the most on my blog.

Sidney - a role model if ever there was one....

Sidney – a role model if ever there was one….

If you drop by and hit the home page – that doesn’t give me much of a clue. After the ‘home page’ the ‘about me’ gets the second biggest hit. But then the top 5 blogs are:

Nottingham’s £3m house – the story back in August 2010 when a house hit the market for an asking price of £3.5m. This was thought to be the most expensive house put on the market. It actually sold in November 2010 for £2.5m. This post has had 2,471 unique hits.

2,334 hits to date for the anticipated opening of Jamie’s Italian. That was back in January 2011. That post also generated the most comments at the time as people searched for information. Interestingly I’m told that Jamie hasn’t been yet! I have, several times. Jamie also appears in the next two most hit blogs – the opening date and the big opening – a guest blog by my colleague Matthew Hannah.]

My blog about Sneinton Market – and proposals for it’s regeneration gathered 1,646 views since May 2010.

The next five most popular are an interesting reflection – they concern Nottingham, Punk Rock, This is England, the Nottingham Tram system and my RICS assessment work!

It’s also interesting to how people find me from Google – the top searches are:

The Sex Pistols (!)
Tim Garratt
Minsk
Nottingham
Rain (?)
RICS

So it seems you like Nottingham, Puck Rock and the RICS? I’m not sure that these three things are quite what I expected!

What is real?

One of the questions we ask our candidates who apply for membership of the RICS is whether you should re-touch a photograph on a set of sales particulars.

magazine_shot

It’s a tough question as we are so used to having photo-shopped images now that putting a bit of blue in the sky can’t do harm – can it? We have to tread carefully around the Property Misdescription Act 1991. The safe answer is to say you wouldn’t alter the sky – although I think there is some room to argue the point. Clearly you can’t remove telegraph poles and pylons – you are then in deep water!

But you do wonder when you look at magazine covers – especially at models – as to how far they are prepared to go. Removing blemishes is the norm – in fact you can buy specialist software to do it. It can even make you lose weight.

The photo in todays blog comes from a magazine – which looks pretty good. Sporty and active spring to mind. It’s a bit flat – the light must have been a bit grey – but this gives accurate colours. There is an issue with the picture though. I have shown a number of people and it takes a few seconds to spot the photo-shop error…

You can deny all you like that your picture has been tweaked – but sometimes you may have been caught red-handed!