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What is this blog about?
Before we go any further! If you'd rather hear about the changes directly from us in a live online workshop - just click below to book in:
In this week’s blog, we cover the main changes in the new January 2025 edition of RICS Valuation – Global Standards, otherwise known as the Red Book.
This is essential reading for all RICS AssocRICS and APC candidates with Valuation as a technical competency, as well as qualified surveyors and RICS Registered Valuers.
You can download a full copy of the 2025 Red Book here.
If you would like to book training on the changes to the Red Book, or to discuss how we can support you to update your valuation templates (including terms of engagement and valuation reports) – just get in touch by emailing jen@property-elite.co.uk.
We also offer a full valuation audit service to RICS Regulated Firms and Members.
Where does the new Red Book apply?
Globally!
The UK National Supplement (as well as other National Supplements) are being amended and published by RICS by 31 January 2025. They will then make references to the updated 2025 Red Book.
When does the new Red Book apply from?
31 January 2025.
Why has the Red Book been updated?
RICS have updated the Red Book to:
Reflect the changes to the latest version of IVS
Incorporate changes from the RICS Valuation Review
Future proof valuation practice, e.g., updates relating to technology and ESG
Help valuers to provide the highest standard of service
Simply and clarify guidance for valuers
Build public trust in valuations provided by RICS Registered Valuers
How is the new Red Book structured?
The new Red Book includes some key changes to the structure of the Valuation Technical and Performance Standards (VPS) and the Valuation Practice Guidance Applications (VPGA).
The Professional Standards (PS) 1 and 2 remain broadly the same in structure:
PS 1 - Compliance with standards where a written valuation is provided (the provision of oral valuation advice is covered in Section 1.8 of PS 1)
PS 2 – Ethics, competency, objectivity and disclosures
The mandatory PS apply to all written valuation work provided by RICS Members.
The VPS have been re-mapped to the new IVS:
VPS 1 – Terms of engagement (scope of work) – no change in title
VPS 2 – Bases of value, assumptions and special assumptions – this is similar to the former VPS 4. Transaction costs are now dealt with in VPS 2.
VPS 3 – Valuation approaches and methods – this is similar to the former VPS 5, but includes methods, as well as approaches
VPS 4 – Inspections, investigations and records – this is similar to the former VPS 2
VPS 5 – Valuation models – new in 2025, building on the former VPS 5
VPS 6 – Valuation reports – this is similar to the former VPS 3
We have produced a helpful crib sheet on the changes that you can download:
The VPS contain both mandatory and advisory (best practice) guidance, denoted by the phrasing explained below.
We recommend reviewing the VPGAs relevant to your area of valuation practice, as there are 11 of them. A key new VPGA is VPGA 11 – Relationship with auditors, whilst VPGA 1 – Valuations for financial reporting has been rewritten. This includes reference to key International Financial Reporting Standards (IFRS), including IFRS 13 (Fair Value), IFRS 16 (leases) and IFRS S1 and S2 (sustainability and climate disclosures).
The VPGAs are generally advisory in nature, advising on best practice.
Part 6 of the Red Book includes the full edition of the latest IVS.
You should always read and apply the Red Book in tandem with any jurisdiction-specific guidance, such as the UK National Supplement.
Confused? It will take all of us some time to get used to the changes and new titles, so continual CPD relating to the new Red Book is advisable!
What is the purpose of the Red Book?
The Red Book provides procedural guidance and requirements for RICS Regulated Firms and Members (Registered Valuers, in particular).
The Red Book, however, DOES NOT tell Members how to value specific properties, prescribe particular reporting formats or override national legislation or regulations.
Semantics…
The Red Book uses certain words to denote how you should apply the guidance:
Must – mandatory, e.g. PS 1 and 2
Should – advisory, best practice
May – optional
How do I know what certain terms used in the Red Book mean?
The Red Book contains a really useful Glossary, in Part 2, which defines all the key terms you need to know. Examples include assumptions, specific assumptions and the various bases of value.
What is new in VPS 5?
The new VPS 5 – Valuation models, is fairly brief with only four short sections.
It defines a valuation model as;
‘a quantitative implementation of a method in whole or in part that converts inputs into outputs used in the development of a value’.
RICS confirm that where a valuation model is used, it must be suitable for the purpose of the valuation and the provisions of IVS 105 must be applied.
The Red Book also states that where artificial intelligence (AI), automated valuation models (AVMs) or valuation calculation software is used, the outputs are only considered to be a written valuation if a valuer has ‘applied their professional judgement to it’.
Where a model is complex or advanced, a greater degree of vigilance is required to ensure that internal errors do not propagate.
How is ESG incorporated into the updated Red Book?
ESG is built into valuation guidance throughout the Red Book, including Terms of Engagement, inspection, investigations, recording and reporting.
How can I find out about any further changes?
We will be publishing further blog articles on the more subtle changes to the Red Book. We recommend that all surveyors involved in valuation work review the new Red Book in FULL and reflect upon how the changes will affect you and your firm.
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Stay tuned for our next blog post to help build a better you.
N.b. Nothing in this article constitutes legal, professional or financial advice.