“Social trends have been drastically altered by Covid-19. And in the real estate industry, changing demands will impact valuations.”
The process of assessing the value of a given asset is often poorly understood.
Buyers and sellers can easily access rough estimates of a property’s value through online platforms. However, these estimates are normally simply derived from previously sold real estate of the same size in the same area. Little consideration is given to the specific characteristics or quality of each property, let alone a broader market analysis.
Depending on the type of appraisal, the land value, construction costs, sales comparisons and income capitalization are all integral to determining the fair market value of a property or land. As such, organizations such as the Royal Institution of Chartered Surveyors (RICS) perform a vital function in providing qualifications to surveyors who understand the complexity of this process.
However, Covid-19 threw a proverbial wrench into the work of the surveying industry.
Social distancing requirements have made it increasingly difficult for real estate professionals to access properties and conduct in-depth appraisals. Not only has this forced these professionals to rely on “virtual assessments”; But the changing demands of businesses, tenants and buyers during Covid-19 may impact the accuracy of assessments conducted before the pandemic.
The advantages and disadvantages of virtual assessments
Virtual valuations have become a necessity in the age of Covid. Research conducted by real estate listing site Zoopla in June showed that only 2% of buyers and sellers would be happy to have their properties appraised in person. As a result, the number of virtual reviews increased by 90%.
With the owner showing his property to an agent or appraiser in real time by video call, professionals can determine the general condition and size of the property in question. While not as accurate as in-person appraisals, such a compromise allows agents and lenders to move forward with the necessary tasks involved in a transaction.
However, there are downsides. Poor lighting can mask various issues with a property’s condition, and camera lenses can distort our perspective of space and size. The responsibility will also lie with the camera operator, who – if the owner is one – may wish to hide certain aspects of his property from the surveyor in order to obtain a higher valuation.
Either way, much of the data that will inform an assessment will always be accessible regardless of the outcome of the virtual tour. With floor plans and sales analysis of comparable properties in the area, much of the crucial work can be accomplished with little or no information from the seller.
So, generally speaking, there is no reason to doubt the legitimacy of virtual valuations. Although they never allow the same level of understanding as face-to-face assessments; they represent a crucial tool in keeping the UK real estate sector on the move throughout the novel coronavirus pandemic. There are good reasons to expect them to stay in the years to come as well, when time or logistical constraints make a physical visit difficult.
Changing demands, changing values
As mentioned above, social trends have been drastically altered by Covid-19. And in the real estate sector, the evolution of demand will have an impact on valuations.
For example, the move towards remote work and social distancing issues around in-person socialization mean people are spending a lot more time at home. As a result, many buyers and renters are now looking for larger, more spacious homes to work from.
This was confirmed by the July survey by real estate agents Dexters, which asked buyers what their “non-negotiable” real estate requirements were. The main new requirements in the Covid era were a spare room that could be converted into a home office and, second, an outdoor space such as a balcony, patio or garden.
Despite recent positive news regarding the development of the Covid-19 vaccine, it is likely that working from home will remain the norm for a majority of professionals in the years to come. Freed from the daily grind, suburban and rural properties further away from his employer will likely increase in desirability among newly housed employees.
These trends will undoubtedly affect real estate valuations. Of course, a key part of the technical training required to be certified in real estate appraisal is understanding how the real estate market is constantly changing and how this can affect the exact value of land or property.
In the face of such a dramatic change, the traditional basic training that surveyors must undergo is actually more important than ever. Only those with the knowledge and wisdom to adapt to sudden changes in the real estate market can continue to accurately appraise properties for the foreseeable future.