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Valuation Colloquium 2010: Organised by Clemson University, USA in association with Oxford Brookes University, UK
Edited by Professor Elaine Worzala
The RICS Valuer Registration Scheme enables RICS members to demonstrate that they do act professionally and with integrity all over the world (Eve Salomon, Chair of the RICS Regulatory Board, February 2011).
Introduction
Property valuations are an integral part of the business community. As Barry Gilbertson, in his paper with Duncan Preston, said "Property underpins a major proportion of financial decisions in mature economies. Failure to ensure assets are properly valued risks financial exposure for a wide range of stakeholders" ([2] Gilbertson and Preston, 2005). This has always been the case, yet at a time of financial crisis the interrelationship between property values and the economy is brought in sharp focus. This paper looks at the role of the Royal Institution of Chartered Surveyors (RICS) in putting into place additional procedures and regulation to restore confidence in valuations in the UK and worldwide.
The financial crash
It is widely accepted that the 2007 financial crash stemmed principally from the proliferation of debt secured on property assets. The vast majority, albeit not all, of these toxic loans started in the USA; sub prime mortgages that were "sliced and diced" and sold on the secondary mortgage market as mortgage backed debt at ratings above their real risk. The result was that when the US housing market crashed in 2006, at a time when the variable rate mortgage rate was also increasing, the plethora of mortgage backed debt that had been sold around the world also crashed. This led to a lack of confidence, not just in the business world but more importantly, in the banking community and inter bank lending ground to a halt. This, in turn, led to a universal lack of credit. The rest, as they say, is history.
This paper is not here to dissect and analyse the financial crash or to attribute blame to the banks, the valuers/appraisers or the financial sector as a whole. That is outwith the scope of this briefing. But the point is that the seeds of the crash lay in the property world and the mortgages that were predicated on valuations. Thus, rightly or wrongly, there is...