In 2020, the Australian Property Institute (API) updated the requirements for PropertyPRO reports. Valuation compliance experts David Brandon (API) and Tony Hill (CoreLogic) explain what these changes mean for valuers.
Why has PropertyPRO been updated?
The API first introduced PropertyPRO in 1998, in consultation with the banking industry. Its aim was to provide valuers with templates and supporting advice for conducting valuations of residential properties for first mortgage lending purposes.
Since then, the API’s Residential Standards Committee has regularly reviewed the PropertyPRO Supporting Memorandum to make sure it continues to meet the needs of both valuers and lenders. When changes are required, the API issues a new PropertyPRO Supporting Memorandum (PPSM), which typically happens every few years.
“Even when the PPSM is updated, the intent of the document doesn’t change,” David said. “Its aim is still to provide guidance around the valuation of high-volume, low-risk residential assets for first mortgage lending purposes.”
The latest PPSM, PropertyPRO 2020, is the culmination of an industry review process that began in 2016.
“An early aspect of the process was to review the Risk Ratings Matrix and update the examples so they’re clearer for our members,” said David. “This has helped to make reporting on risk ratings more consistent.”
What’s changed in 2020?
The API released PropertyPRO 2020 on Sunday 10 May 2020, along with reporting templates for 11 different property types plus a standardised progress inspection template. The May release outlined property types are no longer considered ‘single residential properties’ suitable to be completed on PropertyPRO reports.
As a result, valuers must now complete long-form valuation reports for:
- properties with a land area greater than 20 hectares
- development sites where the highest and best use is for subdivision
- two dwellings on one title where the highest and best use is for subdivision
- construction projects with a ‘Cost Plus’ construction contract
- ACT Land Rent scheme properties
“We also changed the layout, simplified some of the language and moved some of the sections from the end of the document to the front,” said David. “The document now reads better and should provide further clarity for members.” Items of note include:
- the role of the valuer
- requirements for amended reports and update reports
- new section on TBE valuations
- new section on progress inspection reports
Following industry feedback, the API released a further update to the PPSM on Sunday 4 October 2020. The latest version includes changes to:
- definitions of boarding houses and bed & breakfast
- removal of section on update reports
- removal of guidance on how to deal with post TBE Report variations when completing progress reports
What do the changes mean for valuers?
According to Tony Hill, PropertyPRO 2020 helps to address the complexities involved in valuing certain types of properties.
“Rural properties are probably the most impacted because PropertyPRO reports were often used for properties up to 40 hectares,” Tony said. “Subdivisions properties are another significant property type that is now out-of-scope and requires long-form reports.
“Even if they don’t look like it initially, these properties typically require a lot more work than a standard residential valuation. For instance, a development site where the highest and best use is for subdivision may need a lot of investigation and consultation with council around what you can and can’t do with that particular site, as well as consideration of GST issues.”
Now that long-form reports must be completed for these property types, it allows valuers to provide additional details that the PropertyPRO format doesn’t allow for.
“The end result should be a much more detailed report, which is designed to meet the requirements of bank lending policies,” said Tony. “It also gives lenders valuable information to make informed decisions.”
How can valuers make sure they stay compliant?
Although the API has taken steps to make the PPSM as clear as possible, it’s ultimately the valuer’s responsibility to make sure they understand the requirements around PropertyPRO reporting. However, the API is also supporting its members to manage their compliance obligations through education and training.
“We will soon be announcing a Q&A video resource that will allow us to give additional guidance to members on what to do in various scenarios,” David said. “They can also get up to speed with the Residential Valuation Standing Instructions training module. We’ll be releasing the new module shortly, which will include a quiz that asks what valuers need to do in different scenarios.”
CoreLogic has implemented the PropertyPRO 2020 changes, and also references the PPSM and report templates as part of its compliance services. The PPSM is one measure we use when considering valuation quality and risk. Some of our key focuses include whether the property is in scope and commentary is provided on any high-risk features. That’s why it’s essential for valuers to understand what is required and to seek advice as needed.
“Firms need to stay informed and have appropriate training in place to familiarise their valuers with changes as they arise,” said Tony. “And if there’s anything valuers are still unclear about, they can always contact the API or CoreLogic to find an answer.”
To learn more about PropertyPRO 2020, visit the API website.
If you have questions about PropertyPRO or any other compliance matters, get in touch with CoreLogic’s Valuation Quality and Risk by emailing [email protected]