How Much Are Your Business Premises In Your Accounts At?
The rout in commercial and residential property values shows no sign of slowing, making valuation of the assets - and the companies that own them - increasingly tough.
This week has produced some bearish valuation metrics for both sectors. First, the respected Royal Institution of Chartered Surveyors' housing market survey showed that completed sales per surveyor have fallen to less than one a week - the weakest performance in the 30-year history of the poll. Worse, an all-time-high of 93 per cent of respondents report that prices have fallen further in the past three months.
Nationwide now forecasts a 25 per cent peak-to-trough fall in house prices. The government's stamp duty holiday has had zero effect, with the number of mortgages completed in September falling by 15 per cent on the previous month. This is hardly surprising; after all, why buy a house now, when it will almost certainly be cheaper next year?
The same question could be applied to buying shares in UK commercial property companies, where steep falls in asset values and an absence of investment buyers has dented confidence. With few actual transactions for a valuer to reference, most are erring on the side of caution. Land Securities sliced £1.72bn, or 12.7 per cent, off the value of its investment portfolio at Wednesday's half-year results, with far-reaching implications.
"Land Securities has broken ranks, bitten the valuation bullet and been pragmatic about the brutal realities of the UK real estate market," said one analyst.
Businesses like Punch Taverns, where the bottom line is hugely affected by the value of the premises themselves, have seen their shares fall in value from around 950 pence a year ago to 134.5 pence today as millions is wiped off its assets.
They've been hit by the double whammy of the smoking ban as well. Swinging into the red with a £80m loss before tax, after writedowns of nearly £300m on 491 pubs that no longer have value for the group.
This week has produced some bearish valuation metrics for both sectors. First, the respected Royal Institution of Chartered Surveyors' housing market survey showed that completed sales per surveyor have fallen to less than one a week - the weakest performance in the 30-year history of the poll. Worse, an all-time-high of 93 per cent of respondents report that prices have fallen further in the past three months.
Nationwide now forecasts a 25 per cent peak-to-trough fall in house prices. The government's stamp duty holiday has had zero effect, with the number of mortgages completed in September falling by 15 per cent on the previous month. This is hardly surprising; after all, why buy a house now, when it will almost certainly be cheaper next year?
The same question could be applied to buying shares in UK commercial property companies, where steep falls in asset values and an absence of investment buyers has dented confidence. With few actual transactions for a valuer to reference, most are erring on the side of caution. Land Securities sliced £1.72bn, or 12.7 per cent, off the value of its investment portfolio at Wednesday's half-year results, with far-reaching implications.
"Land Securities has broken ranks, bitten the valuation bullet and been pragmatic about the brutal realities of the UK real estate market," said one analyst.
Businesses like Punch Taverns, where the bottom line is hugely affected by the value of the premises themselves, have seen their shares fall in value from around 950 pence a year ago to 134.5 pence today as millions is wiped off its assets.
They've been hit by the double whammy of the smoking ban as well. Swinging into the red with a £80m loss before tax, after writedowns of nearly £300m on 491 pubs that no longer have value for the group.
