Is Pereira Gray’s report a values or valuation review?

EDITOR’S COMMENT You could almost hear the sigh of relief among the major agencies when Peter Pereira Gray’s Independent Review of Real Estate Investment Valuations for the RICS landed on Thursday morning. Pre-Christmas there had been whispers that the review would recommend a division between valuation and advisory, similar to the new regulations placed on the accountancy sector. For many that was exactly what they wanted, but for others – as Pereira Gray points out in his 81-page review – it would have been a major headache, and could actually hinder the expertise of valuers. He of course has a point. The role of the valuer is not to predict, but to provide hard evidence. But in this changing world of real estate, providing that evidence needs an understanding of the risks to real estate, it needs a predictive element. Leases aren’t long anymore. They are flexible, not fixed. They might not even be leases, but management contracts. Advisory – at arm’s length and with suitable measures put in place – is of value to valuers. Of course, anything more dramatic risked being overtaken by events; some (or even much) of the valuation process could be automated in the not-too-distant future. See also: RICS review rules out valuation separation That sigh of relief, however, shouldn’t be too loud, as while Pereira Gray doesn’t go as far as recommending “the independence of the valuation professional from their advisory colleagues”, he does recommend a much more thorough and robust set of principles to ensure that things don’t get “too cosy” and underlines the need to view the recommendations as a package. Just doing one or two won’t fix the issues. Just doing one or two may even force the need for that separation down the line. The package includes the introduction of a valuations compliance officer in all regulated valuation practices, a clear and accessible audit trail for communications between client and valuer, and the establishment of a quality assurance panel that is independent of the RICS but reports to it – plenty of governance, just not quite the level of regulation the accountancy giants have been hit with. For me, however, the report was about more than the 13 key recommendations. It was another example of how dramatically the real estate world is changing and how the RICS needs to step up to support, educate and guide the industry to operate at the highest and most professional level. The review gives plenty of advice on “fixing” valuations – although Pereira Gray admits that future work is necessary around how sustainability and climate risk need to be factored in. But it is really a note, delivered by one of the most respected players in the sector (drawing on evidence from a wide array of experts) on how the real estate sector can thrive. Poring over the document, I didn’t expect to fall upon a section on diversity, for example. An investigation outside of the remit of the report, but something relevant to the future of valuations for the future of real estate. The review talks of trust, of the need for continuing education about the new world and a shake-up of the content real estate professionals learn to earn accreditation, it talks about leadership and transparency. It’s a lesson, for RICS, for valuers, for clients (stop pressuring valuers), and for every one of you. Pereira Gray says it best in his conclusion: “I encourage the reader to see this review as something of a wake-up call for the industry, and to see the opportunity that this review and its recommendations provides: that of creating a strong foundation for behavioural change in professional practice, upon which the profession can build.”   To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews Photo © Jeff Blackler/Shutterstock