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Property valuers drop Brexit clauses from most contracts as markets steady

[LONDON] Five big property services firms are dropping Brexit uncertainty clauses from their valuation reports for most UK assets as market conditions steady after a sharp drop immediately after Britain's vote in June to leave the EU.

The original Brexit clause, seen by Reuters, stated there was a reduced probability that valuers' opinions of the worth of a UK property would exactly coincide with the price its potential sale fetched.

British property was among the sectors hardest hit by the vote in favour of Brexit and at one point commercial property funds worth over £18 billion (S$32 billion) were suspended amid high redemptions from investors concerned that property demand and prices would plummet.

Concerns have since eased with four of the seven closed funds reopening and data from the widest UK commercial property index showing that property values fell less sharply in August than the month before.

"We feel now there's enough certainty in most sectors for us to withdraw that clause from all our valuation reporting," said Robert Gray, head of fund valuations at Knight Frank.

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CBRE, Jones Lang LaSalle, Savills and Colliers said that for some subsectors with greater uncertainty, they had retained reworded clauses that reflected a less cautious tone.

"Savills considers the uncertainty clause is redundant for most markets. However, there is a lack of post-Brexit evidence in some sectors ... and we will reference this in our reports as necessary," said Ian Malden, Savills' divisional head of valuation.

The sectors involve central London offices, development land and buildings, retail parks and large shopping centres.

A revised clause from JLL, seen by Reuters, said there was still a lack of comparable deals in such sectors and therefore valuations reflected a "greater degree of judgment".

Andrew Renshaw, JLL's lead director for UK valuations and professional advisory, said the concerns were largely around the larger asset sizes. He expected the revised clause to disappear completely during October as conditions become more transparent.

For less risky properties, JLL dropped clauses completely from Sept 19, following a meeting of top property valuers and firms last Wednesday, Mr Renshaw said.

Russell Francis, head of valuation and advisory services at Colliers, said the firm had begun dropping clauses many weeks ago, referencing areas of the housing market that had seen strong levels of activity even after Brexit.

In recent weeks, several builders have said sales have risen, and data has suggested prices are climbing again.

On the commercial end of the market, valuers have dropped clauses for properties with long leases and steady incomes, often seen in sectors such as student flats and care homes.

Knight Frank's Mr Gray said the firm's valuations for risky properties would on average be 2-6 per cent lower than pre-Brexit levels.

There are some concerns that such clauses may resurface once Britain begins formal negotiations to exit the EU.

Mr Gray said he did not envisage reintroducing the clause in the short term, though altered market conditions could prompt their return.

Knight Frank and CBRE value around two-thirds of UK commercial real estate market, according to Mike Prew, property analysts at Jefferies.

Reuters could not immediate verify how much market share the rest of the valuers held.


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