As a valuer of almost 30 years I can safely say I have never publicly congratulated my team simply for doing the job that our lender clients expect, i.e. to provide market value. But after a recent sale of an asset in prime central London at £45m I felt it was time to express some pride at my teams experience and skill. This was probably the trickiest assessment we have ever done with an asset with 10 mid and long term leases across 5 flats with an additional head lease and potential freehold purchase. Our assessment for the owner was within 3% of the ultimate sale price just 18 months after our valuation which showed exceptional skill at establishing value. This hopefully reassures our lenders that our valuation team shows great mathematical, skill and judgement in assessing value and a comprehensive understanding of the market we work in.
On a different note, the flooding in London has worried many of our lenders, and with very good reason. The floods we have seen this year, including Knightsbridge this week, will continue and will seriously damage the value of assets. To provide an example, prior to the 2014 floods we valued a block of flats that sold extremely well with the developer keeping one unit at river level which offered exceptional views and level of finish. After it flooded in 2014 the value plummeted from a multi million pound asset to one that few would buy knowing that their living accommodation could flood with river water and raw sewerage at any moment. As valuers we need to react to this, particularly as we are no longer just dealing with riverside flooding but surface water floods which, as we have seen, happen anywhere. Any assets in these newly revised flood risk areas see a dramatic drop in value and with global warming accelerating, this will become a new reality where the lower floors of some flood risk buildings become valueless and unmortgageable.
Finally, as valuers there is always the fear about when the next house price correction will happen. The bad news is that we have far exceeded the historic record earnings to house price value ratio of every previous correction. The good news is that we are still some 30% below the monthly earnings to property debt expenditure when compared to previous corrections (assuming inflation does not drive up interest rates) and with the overseas buyers about to re-enter the London market I can see a strong recovery after what has been a difficult 6 years for Prime Central, and new build, London property.