Discounted cash flow (DCF) valuation

Given the breadth and diversity of RICS Registered Valuers in the UK and around the world, RICS recognises the importance of bringing about lasting change through a holistic basket of proportionate and supportive measures, over an appropriate timeframe, rather than through any one single regulatory intervention. These measures include a global practice information covering DCF valuation, DCF web hub, upskilling programme and a review of relevant global standards.

No. It is the valuer's decision, based on their professional judgement, which valuation approach, method and model is used. Use of DCF is not mandatory (see Global Red Book VPS 5). RICS is encouraging valuers to be more explicit and transparent in valuation through appropriate consideration and application of methods.

Valuers should apply professional judgement around the selection and application of method(s) and model(s). Valuers should select valuation method(s) and model(s) that are suitable for the task. This can evolve over time and valuers should keep up with appropriate market considerations and practice. RICS is encouraging valuers to be more explicit and transparent in valuation through appropriate consideration and application of methods.

The proposals referred to in the question above are designed to be proportionate and mindful of the different valuation purposes and range of real estate investment assets globally. In some markets and locations DCF is already the most commonly adopted method for valuing investment property – irrespective of firm size. The proposals for upskilling, the DCF hub and practice information are intended to facilitate the appropriate use of DCF, but the Global Red Book standard will allow flexibility for the valuer to reflect the valuation purpose and market circumstances in their choice of valuation method and model.