Automated valuation models are among the emerging trends predicted to sweep through the industry’s professional ranks in the coming years.
PlaceTech spoke to several players in the valuation sector to seek their thoughts on the threats and opportunities to this position.
- Andrew Waller, partner at Remit Consulting
- Peter O’Brien, head of valuation consultancy at Avison Young
- Matt Burnham, UK principal of Open Box Software
- Anthony Spencer, partner at Eddisons
What are the new skills that valuers will have to learn?
Open Box Software: Most valuers are going through a process at the moment, which is repetitive, where they’re pulling data from wherever they can and feeding it into software like Argus or whatever valuation engines they use, and their primary goal is to make sure the valuation hasn’t gone down. We’ve moved on from that to being something that is probably a more thoughtful, more insightful, more analytical and probably, depending on where the future of valuation goes, a more risk management style of thinking. Valuations are currently more of a snapshot style, but if you look at how we value equities and the risk analytics around them, there’s a series of valuations which take future trends into account. There’s potential for much more risk modelling rather than getting just getting insights from the market, with the process having a more financial element to it.
Remit Consulting: Valuers are increasingly having to use technology to access and generate data and then analyse it. On the flip side, their clients and the occupiers of buildings they deal with are still human. For this reason, customer-facing skills will be increasingly important and surveyors are likely to become either more like data scientists or client managers. These are the skills that they will need to develop.
Avison Young: The role of a valuer has evolved over the last 10 years; some valuers have been aware of this and some have chosen to ignore it. Valuation is all about data and as a result the analytical skills of a valuer have changed. There is a new breed of valuer coming through – analytical and data savvy, they have the skill set to manipulate market data in such a way as to automate much of the mundane processes valuers are used to undertaking. This is the first evolution of the ‘automated valuation’ model and there are products available today such as GeoPhy that will provide a market value of a property with limited human intervention. The changing skill set will mean valuers need to understand the technical aspects of how these models work, coupled with the market knowledge to advise clients on the wider risks associated with a particular property.
Eddisons: I’ve been doing this for the past 30 years, and I don’t think I’ve seen the impact of technology as much as I have in the past two years. I don’t think as a profession there’s been that much change until very recent times. What’s happened is the ability to be able use tech to access other data and information is a lot more accelerated than it has been. Most young valuers now will rely on what they’re getting from that data from a computer, in times gone by you had to ring people to get that data from the source. There’s a danger of them relying on these valuation software packages, and not taking a step back and asking ‘does this look right’.
What will a valuer’s daily routine look like in 2040?
Avison Young: The role will shift to an advisory one. An automated model can tell you the value of building at a particular point in time, but clients want more than that. They want people to go and see the property and advise them of the key risks. For example, what is likely to happen with the property in the future? What’s happening in the local area that may impact value? All of those advisory aspects of the valuation cannot be provided by the automated model.
Eddisons: With better access to information over the next 10-20 years, I can see a valuer’s role becoming more of a desk-bound, sense-check position. The tech right now is not there, the methodology is still quite similar to what it was 30 years ago, but that will change. There will be a reduction in the number of valuers, but you’ll still need somebody to be credible regardless of what the data says – to put a stamp on it. The role will evolve quickly and will lean towards the higher value, more complex properties, and become similar to an auditor.
Remit Consulting: As we see surveyors and valuers evolving into data science or client management specialists, their daily routine in 2040 may involve both the interpretation and in-depth analysis of the latest data regarding a portfolio or an individual building, before presenting it to a client and advising them on asset management strategy. Fundamentally the job of a valuer won’t change but the work they do and the way that it is undertaken will. Location is an interesting additional point to discuss – we don’t know yet whether clients will accept a valuation where the valuer has not visited the property. This may be possible for mass market valuations when better data is available and that would be a significant change to the working week of run-of-the-mill residential valuations and many regular revaluations.
Are there examples of tech already impacting the role?
Eddisons: We’ve just taken on a valuation software package, which doesn’t make the valuations for you but what it does do is build a template to drive consistency across our valuers up and down the country, so their reports look the same.
Remit Consulting: What our research has revealed is that the explosion of information regarding real estate has given an attractive opportunity for data experts from other sectors and industries to move into the property markets. While it may not be familiar to them, they are increasingly finding value within it. Their new approach, and use of emerging technology, is changing the way in which surveyors and valuers are working. The plotting and analysis of real estate data on maps by the likes of Datscha and Nimbus are providing a better quality of data for the market and are both good examples of this trend. In addition, the increasing adoption of building sensors is generating even more property data and allowing surveyors and valuers to provide precise and better-informed advice to their clients.
Open Box Software: If you look at normalised process at the moment, you’ve either got something like Argus or MRI Software as a valuation tool, and you’re spending a lot of time pulling data from various sources into an engine before re-keying it all into a report. The current process is a bit antiquated, all the valuers that I’m talking to have cottoned onto the fact that that’s not sustainable. They’re all looking at three different components; everyone is trying to figure out how to digitise their business, get as much data in as possible in a digital format that’s reusable and a lot of what they’re doing in the short-term is efficiency driven. The next step is to automate to take away some of the inefficiencies and the big question in the room is going to be is AI.
Avison Young: The technology that’s changing the role today is very different to the technology that will change the role in the future. For example, the role today comprises modern valuation tools that enable valuers to speed up the manual aspects of the role. This isn’t revolutionary, just a new approach to the old valuation process which makes it faster to provide advice to the client. The solutions of the future will involve automated valuation models where there will be limited human intervention in providing a valuation of a property. These initial models are already here and they are becoming more accurate as better data becomes available. For residential properties these automated valuation models have been around for a long time and are very accurate. The key is unlocking the accuracy of the commercial valuation models which is much more complex but there are models available that seem to be closer to achieving this.
What will be the benefits of going digital?
Avison Young: For anyone coming into the industry today I think valuation is going to become more enjoyable. The current role of is heavily process driven and for some this is a challenging aspect of the role. Many of the technological solutions of the future will remove these aspects. This will allow valuers to focus more on the advisory side of the role which involves meeting clients and discussing the property market. Much more fun!
Remit Consulting: Go Report is just one example of technology that is reducing the time it takes to provide building survey reports thus freeing surveyors’ time (and cost) for higher value-adding services. Ultimately, better provision of transaction data will benefit valuers but there is still a long way to go – we still see valuers relying on advertised sales prices rather than precise details of the transaction.
Open Box Software: The benefit should be more accurate, reliable and less-risky valuations for the industry. The nature of valuation may well change, but the counter to that is no investor wants to see their asset valued lower so they may be resistant to change on a methodology that has an impact on pricing. Valuers will be able to spend more time thinking, which will benefit the business in having more of a thought process behind valuations, which would deliver better returns and results.
Eddisons: The benefits will be speed, consistency and transparency, but what I would say across each of those is there will also be disadvantages that will need to be considered. You may be able to get information in an accurate and consistent form quickly; however, it doesn’t necessarily mean that the same sense-check has been applied. The anomalies could be a business risk.
When do you expect to see the tipping point for adoption?
Open Box Software: It’s already started. I took a year out to go sailing in 2016, so I was away from the industry, and since coming back and working with Open Box for the last two years, I’m seeing a lot more insight. The discussions that companies are having now are vastly different than when I left. I think digitisation of their business is something that most players get now. Whether they are all doing the right thing, that’s the question. When we started out two years ago with automation, no one had a clue what we were talking about, now everyone gets what it can do and they’re starting to adopt.
Avison Young: The valuer’s role is going to change and surprisingly it will be less about valuation. It will still be a major part of the role, but it will be more about advice around what’s happening in the market and what are the key risks for the future for that particular property or location. Personally, I believe it will happen within 10 years, but it will be a gradual evolution and valuers will need to slowly adapt to a new way of working.
Remit Consulting: We believe the industry is already at tipping point. People are coming to terms with the rapid changes and adjusting to the realities of a market that is being turned on its head by technology. More of the property professionals we meet are realising it is no longer enough simply to possess data and the value lies in being able to make sense of it. Many businesses are hesitant and hold back from making investments for fear they may choose the wrong product or solution. As a result, the rate of adoption of technologies and methodologies varies across the market and across its various sectors.
Who will be the winners + losers?
Eddisons: The losers will be those firms that are skewed to the more localised, bread-and-butter business. There will be little impact on those firms that are paid for the higher level of expertise.
Remit Consulting: While the big companies have the financial muscle, their size often makes a change in culture difficult to manage. Adopting technology in a big firm can mean a substantial investment, not just in terms of money, but also time. This sometimes causes delays and can lead to missed opportunities and stagnation. There will be opportunities for small, nimble practices to steal a march on their bigger rivals. Smaller, specialist businesses could benefit and establish a strong position and we might even see new entrants to the market, with innovative approaches and business models that disrupt the market. Those who fail will be those who do nothing and hope their traditional methods will be enough.
Avison Young: The winners will be those who are tracking and responding to these changes. The losers will unfortunately be the companies that do not see this coming down the track. They are the ones who are not restructuring their businesses correctly to position themselves in order to accept that these models are available today and the work in the future will require a different skill set. If you don’t embrace it, then you are going to be caught out and before you know it, you’ll be losing money.
Open Box Software: The ones that adapt and adopt early but thoughtfully, and don’t spend too much money on tech which is a much cheaper commodity these days, will be the ones that win. Those who are willing to screw things up and to learn and do better next time will be the ones that rise to the top.