Real Estate Valuations: what will the “new normal” look like?
Maurizio Negri MRICS - PRAXI Valuation and Advisory
There are certainly professions more critical to humankind than real estate appraisal, but today we appraisers have the difficult task of determining the pandemic’s impact on real estate.
Renowned experts have floated the idea of a valuations "moratorium" for the next few months and, possibly, the entire year. While I do understand the rationale, I think it is inappropriate and like avoiding taking your temperature in order to ignore how sick you are.
Evaluations will continue but what scenario can valuers use as a reference point?
On one hand, there is the theme of real estate market clusters. Research reports are beginning to circulate that analyze the specific impact of the crisis on various asset classes: gloomy forecasts for hotels and shopping centers, interest in logistics, and strong doubts about some recently emerging asset classes like co-working spaces and elderly homes.
Valuers will be able to take advantage of the studies and research for fine-tuning, in addition to exchanges of ideas and impressions with investors. In my opinion, this is not where our main difficulties lie.
Instead, our core business comes to mind. I am thinking about direct surveys, whose actual need – necessary always and in any case – has been called into question over the past weeks. It is not simply a matter of optimizing time and costs, but of seriously questioning the true professional content of the real estate appraisal activity.
We will have to ask ourselves what is the purpose of preparing mile long reports full of information already known – like the ridiculous chapters on property location made with a copy-and-paste from Wikipedia – or full of generic and irrelevant data, such as the voluminous macro-economic scenarios compiled directly from the International Monetary Fund website.
Now more than ever, stakeholders need consultants who can support their investment selections decisions and organizational processes with sound advice. Market values and rates must be determined in a transparent way, developed through rational processes, based on consistent reasoning and, as much as possible, supported by objective data.
There are certainly professions more critical to humankind than real estate appraisal, but today we appraisers have the difficult task of determining the pandemic’s impact on real estate.
Renowned experts have floated the idea of a valuations "moratorium" for the next few months and, possibly, the entire year. While I do understand the rationale, I think it is inappropriate and like avoiding taking your temperature in order to ignore how sick you are.
Evaluations will continue but what scenario can valuers use as a reference point?
On one hand, there is the theme of real estate market clusters. Research reports are beginning to circulate that analyze the specific impact of the crisis on various asset classes: gloomy forecasts for hotels and shopping centers, interest in logistics, and strong doubts about some recently emerging asset classes like co-working spaces and elderly homes.
Valuers will be able to take advantage of the studies and research for fine-tuning, in addition to exchanges of ideas and impressions with investors. In my opinion, this is not where our main difficulties lie.
Instead, our core business comes to mind. I am thinking about direct surveys, whose actual need – necessary always and in any case – has been called into question over the past weeks. It is not simply a matter of optimizing time and costs, but of seriously questioning the true professional content of the real estate appraisal activity.
We will have to ask ourselves what is the purpose of preparing mile long reports full of information already known – like the ridiculous chapters on property location made with a copy-and-paste from Wikipedia – or full of generic and irrelevant data, such as the voluminous macro-economic scenarios compiled directly from the International Monetary Fund website.
Now more than ever, stakeholders need consultants who can support their investment selections decisions and organizational processes with sound advice. Market values and rates must be determined in a transparent way, developed through rational processes, based on consistent reasoning and, as much as possible, supported by objective data.