UK - Fund managers have shored up the value of property indices against claims they adequately fail to reflect the market.
In what amounted to a concerted defence of valuers, panel participants at the launch of the IPD UK benchmark returns defended the IPD's appraisal-based indices.
Andrew Strang, managing director of Threadneedle Property Investments, showed his support for the IPD by arguing "they collect the data - they don't make it", and claimed UK valuations had gained "considerable international credit" for speedy adjustment, although there was "still an argument that it lagged".
Indices have come under scrutiny in recent months for failing to capture the market correction. Appraisals, which have no forward-looking element, do not catch even significant market shifts so despite market belief at the start of the correction that property values would fall, indices did not reflect the switch in sentiment.
In contrast, transaction-based indices effectively speculate based on sentiment via transactions, which means they can capture market changes quickly but that they depend on registering sufficient transaction volumes. However, critics argue transaction-based indices reflect sentiment rather than intrinsic values.
Robin Goodchild, European director of strategy and research at Lasalle Investment Management, reinforced the danger of ‘lagging'. He suggested current valuations offered a parallel to those in the mid-199os.
"You won't know how well you've ridden the downturn until this time next year. It's pretty unhelpful," said Goodchild.
However, IPD director Ian Cullen claimed the UK valuation profession was "more tuned in to the marketplace than in the US. In the US, what's happening now would show up in 2009", he added.
Cliff Hawkins, managing director of the UK real estate business at UBS, also said: "I don't think we need to indulge in the national sport of kicking the valuers. They're doing a pretty good job."