What is YP
Multiplier to covert an income stream into a capital value = 1/yield
What is PV of £1
How much £1 is worth in the future if received today
Recent Amendments to the Red Book
Mandatory ESG Integration
Technology and AI statement - must be governed by a human
Alignment with 2024 IVS
Rotation policy of Valuers
What are the Professional Standards
PS1 - Compliance with standards and ethics
PS2 - Terms of Engagement
PS 3 - Valuation Reporting
Market Rent Definition
Estimated amount for which a real estate investment should be leased on a valuation date, between 2 willing parties
on appropriate terms
in an arms length transaction
after proper marketing
when parties act knowledgably, prudently and without compulsion
Term and Reversion
Calculate VP using comps
Calculate term value by capitalising the rent using ARY for remaining term of the lease or life
Calculate the reversionary value by deferring the VP value for the remaining term using an appropriate yield
Add together to get tenanted value
Difference between VP and Tenanted value should be halved in line with the TFC guidance to get reversionary value.
How did I get to the correct figure for the Valuation of the Flat within the Castle
I analysed a wider range of comparable evidence due to the unique nature of the property
I had to call upon category B evidence such as market data and trends and pricing index’s to cross check my valuation
Hierarchy of Comparable Evidence
Cat A - Completed or under offer properties of comparable nature
Cat B - General Market Data - property indices/ local trends
Cat C - Other sources - unconfirmed data (last resort and cautious)
Which measurements standards do I follow
Code of Measuring practise
IPMS - International Property Measurements Standards
Market Value Definition
Estimated amount for which an asset or liability should exchange
on a valuation date,
between 2 willing parties
in an arms length transaction
after proper marketing
when parties act knowledgably, prudently and without compulsion
Market Value for Tax Purposes
Valuation should reflect the bid of any special purchaser in the market
Not all placed on the market at one time, prudent lotting used to obtain best purchase price
Price reasonably expected to fetch on the open market
VGPA’s
VGPA 1 - Valuation for inclusion in financial accounts (adoption of fair value)
VGPA 2 - Valuation for secured lending
Previous involvement (2 years) must be disclosed to the lender
Strict conflict rules
Valuation Methods (Red Book)
Income - (Investment, profit, residual)
Cost - (DRC)
Market - Comparable
Income Approach
Converting current and future cash flows to capital value
Investment Method
Used when there is an income stream and term
Conventional Method - Rent x YP = Market Value
Hardcore - Topslice
Used for over rented investments
Income divided horizontally
Bottom slice - Market Rent
Top slice - rent being overpaid
Higher yield applied to top slice to reflect the additional risk
Yields
Measure of return on investment expressed as a %
Calculated by income/price x100
Discounted Cash Flow - Investment
Growth explicit
Determines a value by examining future net income or projected cashflow then discounted the cashflow to arrive at an estimated value
Profits
Used for valuation of trade properties
Value depends on profit generated not physical condition or location
Annual turnover less costs = Gross profits
Less expenses less operations renumeration = net profit
Residual Method
Determines the value of land by working backwards from the total sale value of the completed development
Subtractions of all costs = residual value
Value = GDV - (development costs + fees + profits)
GDV - Total mv of the property once fully built
Deprecated replacement cost
Value of land in its existing use + current costs of replacing the building +plus fees - depreciation and obsolescence
Used for unique properties where there is no comparable evidence
Obsolescence - physical, functional, economic
Exception to the Red Book VPS 1-6
Agency
Negotiation
Expert Witness
Statutory functions
Internal Purposes
Loan Security Valuation with contaminated land - how did I quantify the effect of the contamination to value
% basis is difficult to quantify so I cross checked by assessing whether the affected land was going to affect the future use of the land/ buildings , and if so, the cost to rectify the issue. this cost could be deducted from the value.
Special Value
The amount that reflects parts or all of the value to a special purchaser
