The API, in collaboration with CQUniversity, held a virtual half-day conference on Wednesday 15 July focused on valuing in the current climate. Over 200 Members attended the conference, gaining valuable insights from the six sessions presented. Below we share our key takeaways from two of the sessions.
Property Valuation in Times of Uncertainty – presented by Tony Mangioni, Mangioni Property Valuations and Consultancy
Tony began his presentation by outlining the current environment: property values are patchy and it’s hard to identify any trends to accurately predict market direction. Stimulus packages are propping up economies worldwide and we are unable to accurately predict what will happen when these packages end.
When undertaking retail and commercial valuations during these times, Tony advised that valuers should consider:
- Rental income/cashflow
- The inability of a tenant to pay rent
- The possibility of business closures and the need to find another tenant (which is proving difficult in the current environment)
- If rental abatements should be an adjustment below the line of the determined value
- If yields and discounted rates are firming or softening
- Vacancy rates
- What may happen to rental income in the future if recovery is slower than predicted
Valuers should use caution and caveat advice with the use of Disclaimer Causes.
Over the long term, Tony expects a possible softening of cap rates in certain asset classes and an increase in mortgagee sales by businesses and homeowners. There will be a greater need for valuers to keep up to date with market information, as clauses may not be relevant at the date of valuation. As more transactions occur during the pandemic, Tony recommends regularly updating valuations in line with this new information which will more accurately reveal how the market is responding.
Methodology to Value During an Uncertain Market – presented by Dr. Steven Boyd and Dr. Garrick Small of CQUniversity
In this session, Dr. Steven Boyd and Dr. Garrick Small discussed the current challenge for property valuers. In stable markets, market value equals investment value. This means a property is likely to sell for what it’s worth. However, this isn’t true in unstable markets, like the one we’re currently in. Dr. Small argued that the current environment could justify the need to valuers to provide multiple property values – that is, reporting on the value now and the investment value separately.
Property valuers traditionally rely on recent comparable sales to assist in their valuation reports, but this is increasingly difficult when past sales figures may not reflect the current or future environment.
Dr. Boyd shared a discounted cash flow spreadsheet designed to help valuers deal with some of the uncertainty they are facing. The spreadsheet allows valuers to analyse different scenarios relating to changes in a company’s cash flow and look at the potential impact of these.
Keen to attend future API events?
As each location permits, we will be bringing back limited face-to-face opportunities to reconnect (at a distance), learn and gain CPD this year. Our team has also been busy putting together a program of virtual conferences and webinars to ensure our members continue to have access to quality Continuing Professional Development (CPD) opportunities. Please visit the API website to find out more.
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