Knight Frank have recently announced that their valuations will no longer automatically contain the “doom and gloom” Brexit clause in their valuations. You know the ones which tell their clients that now we have voted to leave the EU the property market is stuffed. These are known as “uncertainty clauses” and basically tell you that despite years of training and RICS qualifications, valuers have still not perfected the art of predicting the future.
What is interesting is that other large firms are not necessarily following suit. Some will use them on a case-by-case basis even though there is an acceptance that such clauses are redundant in most market sectors.
The vote to leave the EU was a surprise – a shock even. No one knew what would happen to the property market and so the “uncertainty clauses” were born. “We don’t know what is going to happen but it could be bad – so we are assuming the worst” dressed up in pseudo-professional-authority-speak .
One of our clients very recently had the misfortune to suffer from one of these bearish valuations. They requested a bank valuation for a small investment acquisition – a modern office next to a motorway with a long term lease and excellent tenant. All in all a good, solid buy – 7.5% stock all day long. Unless the UK voted three months earlier to leave the EU in which case, according to the valuer, it was a complete liability.
So they down valued it by 10% from the price agreed in the open (post-Brexit) market between a willing seller and willing purchaser. They thought it would take 6 months to sell at that reduced price which represented a yield of just under 9%.
I have been pestering them for more stock of this quality at these yields for a couple of weeks now.
Should I be surprised that they have not come up with anything yet?