Valuers have been guilty of “fashionable pessimism” since the UK voted to leave the European Union, according to John Redwood MP.
Redwood, one of the most prominent Leave supporters before and since the referendum, said prices achieved for trophy assets over the past 12 months demonstrated that many valuers had over-discounted prices.
“I’ve noticed a number of companies had been selling off buildings and seemed to be selling them at premiums to the latest valuation after the Brexit vote,” he said.
“There was definitely pessimism following the vote when valuers told us there would be a sharp fall in property values which didn’t occur and we have seen one or two big trophy buildings going at well above the recent book valuations. So I just say let’s cheer up a bit and let’s be realistic.”
Speaking to EG after addressing this week’s Props breakfast in London, Redwood added: “It looks like [valuers got it wrong]. I’m not asking them to be falsely optimistic, I’m asking them to be a bit more accurate because clearly the buyers have been more optimistic than the valuers.”
He also called on management at some REITs to “cheer up”.
“REITs look as if they are on a double discount because a lot of the shares are at a discount to the stated asset value and the assets themselves may be at the low end.
“I’m not predicting they are about to take off because it is very fashionable to be pessimistic and some of the REIT management don’t seem to be very jolly either.
“Maybe they all need to be cheer up because I think we will need new buildings after 2020. There will be plenty of tenant demand and we need to make sure we are responding.”
Speaking at EG’s London Development Summit this week, Land Securities chief executive Rob Noel said it was a “crass generalisation” to draw market conclusions from the sale prices of trophy assets such as the Cheesegrater and Walkie Talkie, which sold to overseas buyers at 26% and 13% above book values respectively.
“Pricing metrics for property are a balance of risk and reward,” he said. “It’s wrong to put the pricing of two spectacular global buildings and use them as a proxy for the UK property market.”
Listen to the full interview with John Redwood.
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