Valuers' Perception on Mitigating Material Uncertainty in Property Valuation

Abstract

Property valuation is the process of estimating the market price of an asset, especially one carried out by a professional valuer. The estimated price significantly affected by uncertainties in the market where the impact of these uncertainties will be reflected in the output figure, i.e., the valuation.  Thus, careful consideration is essential for valuation assignment in the relevant market. The existence of recent or contemporary evidence, and the degree of trustworthiness of that evidence when determining the level of uncertainty at a specific valuation date is a requirement to minimize the level of material uncertainty in property valuation process. In this context, the main purpose of this study is to figure out valuers’ perception on best mitigation measures for material uncertainty in property valuation procedure. The population of the study are the professional valuers who engaged in property valuation in Sri Lanka; members of Institute of Valuers of Sri Lanka (IVSL) and Royal Institution of Chartered Surveyors (RICS). The sampling techniques of the study is cluster sampling and total of 270 members answered the questionnaire distributed via email. The analysis results confirmed that COVID-19 pandemic situation, valuation assumptions and clients’ influence are major contributory factors on valuation uncertainty. However, the factor extraction and rotation confirmed that only uncertainty created by the COVID-19 pandemic situation and valuation assumptions are two significant elements on material uncertainty of valuation. The findings suggest that client influence may not be seen as a threat to the emergence of material uncertainty. Furthermore, the study identifies measures such as developing a digital land registration database, defining valuation procedures as per the guidelines of respective valuation institution, use of realistic valuation assumptions, and analysing long-term market behaviour are appropriate measures for mitigating material uncertainty in property valuation.