§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
By what process the Valuation Office arrived at a rental value yield basis of 12.2 per cent in its recent valuation of the freehold properties in the former Employment Service Estate. [HL5260]
§ Lord McIntosh of HaringeyThe Valuation Office Agency was instructed to value the properties on the basis of market value in accordance with the Royal Institution of Chartered Surveyors' appraisal and valuation standards. Vacant possession of the properties was to be assumed.
The individual yield adopted for each property typically ranged from 8 per cent to 13 per cent. The actual percentage adopted in each case was derived from the investment yields of sales of comparable let properties in the open market and reflected the construction, condition, user and location of the properties. In some cases a direct comparison of capital value was made with comparable properties. The poor letting prospects of most of the properties reduced their final values.
The majority of the properties were situated in secondary and tertiary locations in lower-value areas of Great Britain and in most cases it was necessary to defer the receipt of the estimated rental income from the property for a period typically of one to two years to reflect the period required to find a tenant and any rent-free period that would have to be negotiated with the prospective tenant having regard to market conditions that existed at the time of valuation.