Navigating abnormal uncertainty in valuation: The case of property valuation in Sri Lanka

Abstract

Uncertainty is inherent to property valuation, and valuation practitioners are accustomed to managing it. However, the compounded events: Easter attack, Covid-19 pandemic followed by the economic crisis in Sri Lanka introduced an unforeseen, abnormal level of uncertainty in the real estate markets from 2020 to 2023 or so, with which valuers were relatively unfamiliar. The domain of practitioners’ approaches to address abnormal uncertainty remains less explored. Accordingly, this paper aims to investigate how valuers in Sri Lanka dealt with abnormal uncertainty in valuation experienced during 2020 to 2023 or so. Employing a qualitative research approach, data for this study were gathered through in-depth interviews conducted in the first quarter of 2024 with purposively selected 12 professional valuers practicing in Sri Lanka. The study finds that the valuers largely relied on a mix of heuristic, pragmatic, and relationship-based strategies to navigate abnormal uncertainty against the background of data-poor and opaque real estate market. Professional judgement emerged as a central mechanism reconciling the conflicting market signals and the limited market evidence. While some of these practices demonstrate alignment with internationally recognised valuation guidelines and standards, some fall outside of formalised frameworks leading to behavioural uncertainty in valuation. The study highlights the need for the development of context-sensitive professional guidance for valuation under conditions of abnormal uncertainty to ensure consistency and transparency in valuation practice.