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27th June 2008

Commercial Property Valuations Face Uncertain Times

The commercial property market is in such a state of flux that it has become increasingly hard to pin an accurate valuation onto a property. The situation is at a point where the Royal Institution of Chartered Surveyors might advise its members to stipulate that there is an 'abnormal uncertainty' when they perform a valuation, meaning that the valuation might not be something to rely on and that the actual value could change at short notice. This gives some legal protection to both the valuer and the client. The instances when such a clause is invoked are usually along the lines of 9/11 or Hurricane Katrina, indicating that we are in serious times indeed.

Valuation uncertainty is causing the market to be ever more wary and unstable. An amount of normal uncertainty is always present in any valuation but circumstances are such that property owners that might have been considering selling are now more likely to wait until the market obtains a measure of stability. Some might even panic buy or panic sell, concerned that if they donít move quickly they will be in a worse position some months down the line.

Uncertainty has been mirrored in the residential sector, with, for example, hundreds of city centre new-build apartments lying empty while their values drop and further construction of similar properties having stalled. Without any more new-build properties appearing on the market, valuers are having to compare their newest properties against older homes and therefore face a value mark-down. This might appear to be good news for the buyer, but with the credit crunch making it harder to obtain a loan, especially where first time buyers or new customers are concerned, banks are currently less likely to be accommodating.