With Sydney’s booming residential real estate market, a commercial property trend is appearing amongst our recent “investor” clients.
They are more amiable towards buying commercial property, meaning commercial property values are also rising, rather rapidly.
This is the first time in our blogging history to write about the same topic in both our departments – Commercial & Residential.
We wrote almost 2 years ago about whether to invest in commercial property or residential real estate.
With such an influx of borrowers, lenders are showing signs of practising the desktop valuation than the traditional and proper valuation services of their panel of valuers. Again, I repeat my belief is that valuers are forced to “rush” their valuation reports by their clients – the lenders.
It is obvious this is not only impacting first time investors or even businesses buying their own real estate, it is also affecting the manner in which lenders conduct their valuation for lending and other purposes.
Today’s valuers are under increasing pressure from banks and other clients to conduct their assessments faster.
Valuers have always been proud of their profession when in their day, they conduct their service in full and in line with established practices.
With mounting pressure to deliver valuations quickly, some in the industry have turned to electronic valuation platform aka desktop valuation, that rely on a database of information to make quick lending assessments for commercial property, free of any hands-on assessment.
New technology in this area is surely the cornerstone of speedy reporting. Right? Well, it is no in this case.
The desktop valuation is somewhat faster to complete and submit to the client, because it is performed without stepping foot in the commercial property, but for the speedy delivery of the report, the process eliminates the most crucial factor of the service to deliver accuracy and relevancy. Why I hear you ask?
The “electronic” desktop valuation fails to understand that every property – even a vacant land is different – every property will have a varying level of quality, desirability, distraction, extension, renovation, maintenance, even the quality of the internal finishes and the structural integrity of the building. These are but a few of the elements that cannot be assessed by valuation firms that rely on electronic valuation platforms alone. For example, the location of the property in relation to the business trading out of it.
Would-be buyers are finding that desktop valuation that fall significantly short of the selling price are resulting in smaller mortgages issued by banks and the need for larger deposits.
Those who wish to borrow against the value of other assets to pursue the real estate acquisition are also losing out, finding that banks will offer them less than they would otherwise be entitled to, based on desktop valuation.
The only way to rule out the risk of an inaccurate property valuation is to seek the expert advice of a proven valuation firm that doesn’t rely on desktop valuation platforms for their processes.
Valuations require an in-depth understanding of the market as well as the property – the infamous DSR, Demand and Supply Ratio, market trends.
No technology can replace the human touch, at least not when valuing a property.