Automated property valuations is something we’re happy to give a guarded welcome to, but we believe human input from a qualified chartered surveyor will remain vital.
RICS says that despite the growth of automation globally, there is no universally agreed definition of ‘AVM’ but in its consultation paper, the organisation states:
“Automated Valuation Models use one or more mathematical techniques to provide an estimate of value of a specified property at a specified date, accompanied by a measure of confidence in the accuracy of the result, without human intervention post-initiation.”
While embracing data-driven approaches, many valuers will continue to undertake physical site inspections and apply local knowledge to ensure accuracy in their reports.
The worldwide growth in automated valuation models, or AVMs, is the focus of a recent industry consultation led by professional body the Royal Institution of Chartered Surveyors (RICS).
It’s something the profession is looking at and taking seriously. While software has long been available to help with valuations, the sheer array of information sources and vast amounts of data available mean we are now at a digitisation tipping point, with automated property valuations arguably the next logical step.
Increasingly, you can take an AVM-based approach especially for property types that are similar to each other and are being widely traded. An example would be big blocks of apartments coming on the market on a buy-to-let basis.
We should be ready and willing to embrace the positives of automated valuation, including the potential for cheaper, faster transactions. However, not all properties lend themselves to it.
There are so many properties with nuances around physical characteristics, location, access issues and many other bespoke factors that you need human input to analyse and assess. Valuation is both an art and a science.
The danger is that too much automation risks leading the market rather than acting as simply another tool in the armoury of surveyors, valuers, insurers and lenders looking for accurate comparisons and cross-checks.
There is also uncertainty about how automated property valuation can operate in periods of sudden market volatility and shifting prices.
And if they become self-reinforcing in their calculations – where one valuation is informed by another – you could end up with a beast of a system on which we will all be too reliant.
The strength of any automated valuation model is totally driven by the data used to develop and operate it. It only takes one glitch or incorrect calculation and you have a serious problem. A popular phrase first used in 1950s computing was ‘garbage in, garbage out’.
As surveyors and valuers, we need to tread cautiously around AVMs and really think about this as an industry.
I worry that automated property valuations won’t provide that extra, vital piece of information that determines the decision to lend or not, or addresses a legal point or issue that comes up and needs to be considered.
We will always embrace technological change, and we give automated property valuations a cautious welcome but the property industry has to be conscious to the fact that they are not fool proof.
