Nasreen Hussain, Director of Finance & Resources at Soha Housing, writes about the impact of the coronavirus crisis on valuations and the housing market.
At the start of the lockdown, one of the concerns that FPAG discussed was the impact on housing property valuations. We spoke to Richard Petty, Head of UK Living at JLL, and were very assured over the pragmatic, common sense approach which is being adopted.
This approach is laid out by the two leading sector valuers, JLL and Savills, in their joint statement on ‘EUV-SH and MV-T Valuations – Impact of Covid-19 Crisis’, published on 29 April 2020. The joint statement considered valuation practicalities, the housing market, EUV-SH and MV-T valuations.
It was comforting to note that EUV-SH values are expected to hold up well on the basis of the balance of reduced income and costs. MV-T values may fall by up to 10% which is aligned to negative house price growth but which will vary according to local market conditions.
Another joint statement, ‘Covid-19 Crisis – Valuation Update’, was issued by JLL and Savills to provide an update on the use of Material Uncertainty Clauses and inspections on 26 May 2020. As a result of social housing market activity and the mitigation measures taken by the sector, the valuers have lifted the Material Uncertainty Clause UC for EUV-SH valuations only.
So what does it mean in practice? Soha was able to draw down a deferred private placement of £40m in mid-April 2020, as per the drawdown date with no change to the pre-lockdown values.
One of our treasury management policy golden rules is to maintain 10% excess security above loan requirement levels. Actual security held by some lenders is in excess of the rule. We were thinking about releasing excess security but have adopted a cautious approach. We will now wait until there is greater certainty, which may be some time.
In conclusion, it is great to note the proactive approach taken by the sector valuers. It is also very helpful that the valuers are issuing joint statements as events unfold during this unprecedented and rapidly changing environment.