How will RICS’ new draft guidance on valuing flats affect buyers?
The leasehold flat market has been in chaos ever since the Grenfell Tower Disaster. And with good reason. The terrifying events unfolded on television before our very eyes and shook many people to their core, myself included.
The Government quickly introduced legislation to replace all flammable ACM cladding, taking active steps to ensure it never happens again. However, the leaseholders often end up paying for these replacements.
These remediation costs, along with the lack of mortgage grants and general uncertainty over cladded flats, mean the market is really struggling. RICS guidance, which is still in the public consultation phase at the time of writing, should come in alongside other industry commitments to turn this around.
Here are a few of my thoughts on the draft RICS guidance and how it might affect anyone buying a flat in the near – or distant – future.
The draft RICS guidance affects cladded multiple-occupancy high-rise buildings
The draft RICS guidance affects cladded blocks of flats. The new valuation advice is coming about in the wake of the Grenfell tragedy and the remediation laws passed shortly after.
After Grenfell, the Government identified hundreds of high-rise buildings fitted with the same flammable ACM cladding. This needs to be removed and replaced. So far, we know of 486 buildings – in total – that have required work. Many of these have had new cladding; many are still being worked on. (RICS estimates there are far more out there.)
Understandably, the months and years after the fire made cladded high-rise buildings far less desirable. Aside from the terrible fire and nationwide mourning, the Government demanded all ACM cladding be replaced immediately. For most building owners, the only way to pay for this was to impose a remediation cost on the occupants.
These factors combined to drive demand way down. At the same time, mortgage lenders began refusing mortgage applications for non-remediated properties. Again, although it hit the market hard, I can understand this – the lenders want to protect their investment.
But where does that leave the people who already live there? They’re finding it very difficult to move. First, mortgage companies weren’t financing the applications of potential buyers. Second, the values have plummeted.
I’m pleased to say that, thankfully, recent commitments from the housing industry look set to help them out. That’s where the RICS guidance fits in.
What is the draft RICS guidance for flat valuation?
The RICS guidance fits in alongside other industry changes to make the flat property market accessible for all once more. It’s only possible for RICS to release this because of things like:
- Commitments from mortgage lenders
- New statutory leaseholder protections
So, what does the guidance actually say? Well, it’s still a work in progress – a draft. However, it looks like it’ll combine the interests of key stakeholders. These could include the current occupants, buyers, building owners, Government etc.
It will include advice for valuers (including surveyors like myself) on how to reassess what a flat is worth. This will involve considering the remediation costs imposed on many buildings to pay for the cladding replacement.
The RICS guidance will help return the market to a relative ‘normal’, giving high-rise occupants and stakeholders much more financial security.
When the guidance is implemented, how will flat valuations affect buyers?
If the RICS guidance is implemented, it’s good news for buyers. It’s good news for sellers, too. In fact, it’ll be a massive relief to the property market as a whole.
Once the market frees up with commitments from the general industry, surveyors will take everything into account. When you look to buy a leasehold flat in a cladded building, a chartered surveyor will assess the value. They’ll consider the expected desirability, remaining lease, and remediation charges.
Of course, all the usual valuation factors still apply, too, such as condition, local area and amenities, accessibility, etc.
One last thing I feel is essential to mention. RICS always acts in the public interest. It isn’t owned by the Government or controlled by the housing industry. Therefore, it can be trusted to make the best decision for all parties involved.
Get in touch with GB Home Surveys for a flat valuation
Before you purchase a flat in a cladded building, I’d advise doing your research. First of all, ensure the building work is completed or at least actively in progress. Remediation costs can be high, so factor these into your cost-of-living calculations.
Crucially, a chartered surveyor can help you grasp what a flat is worth, factoring in all the above (and much more). If you’re interested in what GB Home Surveys can do for you, why not contact our head office using the form below? I hope to hear from you sometime.
Martin Taylor MRICS
Chartered Surveyor, Bristol & Bath
