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How Did Valuers Become The Bad Guys Of Property?

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This is a good read..http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3131625&c=3

Valuers are taking flak – from investors when they slash values and from the banks when they don’t. In the first of a three-part series, Mark Shepherd examines how the profession reached this impasse. We want to hear from you: are your valuers being too harsh, or are you a valuer who is giving the correct price?

Valuation used to be the property industry’s forgotten art. When the market was rising, few investors and developers cared how the price of their building was calculated, as long as the bank signed off on the loan or the buyer completed their purchase.

But now that the market is plummeting, the world of valuation holds sway over those who will survive and those whose reputations will be shattered. All of a sudden, the way values are calculated has been thrust into the spotlight and valuers are in the firing line.

At the centre of the issue is whether clients have confidence in valuers that have been starved of transactions in the market on which they base their decisions. They have the tough job of providing valuations that determine whether a struggling property investor is in breach of its loan-to-value covenants, or whether the assets it wants to use to refinance loans will be adequate security for the bank.

King Sturge estimates that £22.7bn of commercial property debt will reach maturity in 2009 and require refinancing. JP Morgan estimates that, overall, £148bn of debt will mature over the next five years, peaking in 2012. This is coupled with a 31.5% fall in the value of commercial property since the peak of the market in 2007 according to Investment Property Databank, which has put loan-to-value covenants at risk.

Property derivatives and property equity markets are pricing in a 50% peak-to-trough fall in property values.

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They are becoming the good guys of the HPC.

Increasingly, they are setting values below the "sale agreed" price which is forcing price renegotiations at the bank's insistence or for chains to fall apart.

From some of the comments that I have seen and heard, they are actually helping to lead the market lower.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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