Commercial Property News

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Wednesday, May 31, 2023

RICS updates valuation guidelines on new build residential property

RICS is to clarify the guidance it provides to its members on the valuation of new build residential properties. These changes follow the recommendations of a joint CML and RICS working party which was convened to consider concerns over the difficulties facing valuers where sales incentives are offered by developers in an often less than transparent manner.

It is not uncommon for furnishings and fittings, "cash-backs", holidays or even new cars to be offered as incentives by developers to encourage people to buy new residential properties. These incentives can have a distorting effect on the market in that the price paid may not reflect the market value of the property.

Valuers have always been required to provide mortgage lenders with an objective opinion of market value. This updated guidance should further assist them in this role.

The updated guidance in RICS' "Red Book" for valuers emphasises the need for valuers to be on their guard when valuing new build residential property and the effect of any sales incentives which could have a distorting effect on the agreed sale price. Valuers may also need to look for comparable evidence beyond the immediate development.

Andrew Gooding, RICS Valuation Faculty Director said: "Valuation of newly built residential property is not always as straight forward as it may appear, especially in situations where localised excess of supply over demand encourages developers to offer sales incentives. RICS valuers need to be wise to these issues."

Jackie Bennett, head of policy at the Council of Mortgage Lenders said: "We welcome the greater price transparency that this new guidance will help to foster. Lenders will be able to have greater confidence as a result."