It is not surprising that office owners are particularly interested in this cycle of financial reporting and asset valuations.At a time when weaker demand for office assets – due to the increased number of people working from home, for example – was cutting rents, one way valuers are being encouraged to inflate values of assets such as offices is to ignore the effect of incentives offered in new lease agreements.
“But I expect there would be conversations going on between the valuation profession and individual asset owners to navigate the myriad existing market forces that might impact value for financial reporting obligations this year,” Ms Hodge told theShe said the institute provided clear guidance to valuers about globally recognised standards and how to do valuations at a time when there was a lack of transactions to guide pricing.
As asset owners often borrow to acquire property, the combination of higher interest rates and falling rental streams could leave them in breach of loan covenants, by pushing their gearing above certain levels or by giving them insufficient rental income to service their loans. SMSF investors will get affected. The other ones will be the industry fund investors – if the valuers and auditors haven’t done their work.Despite well-publicised declines in values of CBD buildings such as Mirvac’sand the Dexus-owned Sydney tower at 1 Margaret Street, the risks around valuation were greatest for owners of lower-grade office buildings, many of whom were SMSF investors, and for investors in unlisted portfolios of office assets such as industry super funds, Mr Dayananda said.