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No evidence of ‘price chipping’ as social housing transactions remain steady, valuers report
Transactions of tenanted social housing have not been affected by the COVID-19 crisis and there is no evidence of ‘price chipping’ in the sector, a new report by the sector’s biggest valuers has found.
In an update regarding the impact of coronavirus on social housing valuations, valuers JLL and Savills said: “It has been apparent from early in the crisis that transactions of tenanted social housing are continuing at normal levels with no evidence of price chipping.
“Activity levels remain high, with a number of registered providers bringing portfolios to the market.”
The report also found that valuations using the Existing Use Value for Social Housing (EUV-SH) method will no longer be subject to a ‘material uncertainty clause’ (MUC) as the sector remains prepared for loss of incomes and increased risk.
Some registered providers have seen an impact on rent collection but the sector is prepared to address any loss of income and increase in risk, the valuers noted.
“As a results of these factors, we no longer consider that there is a material uncertainty when valuing on the basis of EUV-SH,” the update said.
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The update comes as the Royal Institution of Chartered Surveyors’ material uncertainty leaders forum agreed that the MUC should be lifted with effect from 26 May.
However, MUC will remain in place for valuations undertaken on the basis of Market Value Subject to Tenancies (MV-ST).
JLL and Savills also cited “strong investor sentiment” as another reason for lifting the MUC, following a flurry of housing associations issuing own-name bonds and aggregator-led deals since the pandemic took hold.
Following relaxation of restrictions in the property market made by the government, JLL and Savills are resuming external inspections of social housing and development sites.
The update said: “However, for the time being, we will not be conducting internal inspections of tenanted properties for valuation purposes.
“Most valuations of social housing can be undertaken with a combination of external inspection and available technology, and we consider internal inspection to be non-essential at this stage.”
In their initial briefing on the impact of COVID-19 on social housing valuations, JLL and Savills predicted that EUV-SH valuations would “hold up well” while MV-ST valuations were expected to fall by 10%.
The EUV-SH approach assumes that social housing units will continue to be let in perpetuity for the property’s existing use and that the regulator will not block a sale under such circumstances.
