It’s time to drop the material uncertainty clause for most property valuations – the market has largely adapted to covid now.
In late October 2020, I was presenting a paper at an international Zoom conference and suggesting that, even in the depths of a second wave of coronavirus across Europe, property markets – and thus valuers – had adapted to the point that reliance by valuers on the ‘material uncertainty’ disclosure is no longer appropriate. For suggesting this, a viewpoint shared by the Royal Institution of Chartered Surveyors, I was adamantly told by the moderator that I was “living in cloud cuckoo land”. His argument was that people are really struggling with government-imposed lockdowns impacting so negatively on their lives and thus a valuer cannot objectively value any underlying property assets. While this misunderstanding could be the result of my own poor exposition, I think it was more about the fear of valuers operating in markets that differ from the pre-covid environment.
Let me explain. When covid was declared a pandemic in March 2020, many professional valuation bodies around the world recognised that the complete stagnation of all property markets meant that uncertainty in valuations would be greater than normal. This is called ‘material’ or ‘abnormal’ uncertainty and relates to the degree of uncertainty that the valuation figure provided would match the hypothetical sale figure in the market at that point in time. And, in the stagnation of that period, I fully concurred that it was appropriate to make such a declaration.
But, as with any shock to the system, markets quickly adapt. While the personal loss and business failures caused by covid were and still are traumatic, the valuer has an obligation to the client to provide a professional valuation. When I started as a valuer, I remember speaking with some of my colleagues who had worked through the Second World War, when valuations were still needed and had to be provided with no market data at all. While they were very supportive of a young surveyor, they were also quite dismissive when I suggested that I didn’t have enough evidence on which to base my valuation, commenting that I “didn’t know I was alive”. A valuer cannot abdicate their professional responsibility.