Keywords
Citation
(1998), "Accuracy in valuations", Property Management, Vol. 16 No. 2. https://doi.org/10.1108/pm.1998.11316bab.004
Publisher
:Emerald Group Publishing Limited
Copyright © 1998, MCB UP Limited
Accuracy in valuations
Accuracy in valuations
Keywords Valuation methodology, Valuation profession
The Donaldsons Retail Spotlight has again highlighted problems associated with the valuation techniques used by valuers and by the market. In the 4th quarter survey 1997 Donaldsons show that there is probably a 10 per cent error in prime shop valuations.
They say one result is that property unit trust prices may not be all they seem; quite serious anomalies are present which all investors must understand.
The data on which Donaldsons rely for their findings is the widely quoted investment property databank (IPD) monthly index. This is based on the valuation data provided monthly to IPD by the 18 firms of valuers appointed by the 55 funds participating. These are "Red Book" figures and IPD adopt them faithfully, providing the best independent guide to market levels.
But Edmund Camerer Cuss of Donaldsons says that even this guide is likely to mislead. "On average, valuers assessments are simply not reflecting the actual market. They are wrong and people relying on them for trends, market prices and performance measurement should be wary. This is not a complex mathematical point. It is simply the case that the prime yields being bid successfully in the dealing market are not being adopted by the valuation teams", he said.
Donaldsons think that the problem lies partly in our professional structures and partly in our institutionalised valuation methods. Edmund Camerer Cuss added, "The current methods are not up to the job. For a securitised market we will need something better, or at least we shall have openly to acknowledge the shortcomings of what we do now."
Donaldsons Retail Research has produced their Spotlight report quarterly for the last two years. Previous editions can be supplied on request.
Anomalies in valuers' prime shop figures have been commented on in the last two issues as has the lack of any direct link with gilts yields.
For further information contact Edmund Camerer Cuss or Rebecca Humphreys, Donaldsons. Tel: 0171 9301090.