Gerry Harvey declares – nobody knows what properties are worth

Gerry Harvey, executive chairman of retail giant Harvey Norman, is standing by his board’s decision not to revalue the company’s $1.25 billion property portfolio, despite huge falls in commercial property valuations in the last six months.

While Australia’s listed property groups wrote down the value of their portfolios by more than $14 billion in the last six months, Harvey has decided not to adjust the value of Harvey Norman’s portfolio.

“I’m not going to revalue or devalue anything. I have taken the view that nobody knows what properties are worth at the moment,” he told The Australian Financial Review.

Harvey says he is too miserly to pay a commercial property valuer, but remains confident that the properties on the company’s books would sell for book value or greater if they were put on the market.

There is plenty of merit to Harvey’s theory. The number of property deals has fallen sharply in the last 12 months, as property owners attempt to bunker down and try and ride out the downturn – only those owners with desperate problems are putting their properties on the sale block.

In ANZ’s recent property outlook report, economist Paul Braddick commented that the lack of transactions in the commercial property space “raises serious questions over the extent of true price discovery”.

ANZ expects retail property values to fall across the board in 2009, as softer retail sales lead to softer rental yields.

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