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A changing market calls for real estate valuers who know the market through and through
December 8, 2023
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Hitting the brakes and the accelerator
Banks and investors have become more cautious. And rightly so, you may well think – because while interest rates were skyrocketing, commercial real estate was losing value. So it’s understandable that they hit the brakes. The upshot: a challenging but at the same time interesting market for real estate valuers. The reason being: the more real estate sold, the fewer relevant reference properties and the more complicated it becomes to do value assessments.Untenable situation
In a market in which few transactions are concluded, it’s a challenge to arrive at an accurate value assessment. In recent years, the emphasis has been on objective substantiation of the market value. This is done using reference properties: comparable buildings in the same environment, which have just been sold. The perfect method in a bullish market. That said, if sales fall, a couple of reference properties will quite simply not be a proper reflection of real estate value – that’s if there is enough real estate being sold to compare it with. The danger is that the assessed values will be much higher than the transaction values, and that produces an unrealistic image.New cycle
Every crisis has its own problem areas. But even though history never repeats itself exactly, the situation we’re in now pretty much resembles the one we were in after 2008. The one big advantage is that we’re tackling this crisis much more professionally. Fact is that we have much more data, which we can use to make reliable comparisons. This means that the market is much more transparent than it was ten years ago . That helps our valuers to make realistic estimates, which in turn means that the gap between valuation and transaction values is narrower.Let’s not beat about the bush
The role of valuers is changing. Indeed, many of them are facing a market situation that they’ve never come across before. Now it really comes down to their own expertise, data insights and network – but above all steadfastness – to arrive at a good valuation. For this, they have to explore the market thoroughly. Only there will they arrive at a reliable and realistic assessment – by conducting extensive research, and talking to brokers, users, financiers and clients. What’s more, this situation offers the opportunity to take ESG aspects more into account in the valuation process. At any rate, to avoid mishaps, it is essential that valuers do not create a parallel reality, because that leads to the wrong decisions. Be confident enough to take a position: at the end of the day that is the only way to contribute to future-proof real estate. In other words: tell the truth, even though that can sometimes be tough.Related Insights
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