Towards a global standard for measuring and valuing property
Towards a global standard for measuring and valuing property; Measuring standards vary from country to country, making it difficult to accurately compare and value property
A committee of industry executives focused on creating the first-ever international standards for measuring property expects to issue a first draft by next June.
The International Property Measurement Standards Coalition, formed in May, created a Standard Settings Committee last month, comprised of 19 members representing 11 countries. Progress has been "very positive and very fast," Ken Creighton, director of professional standards for the Royal Institution of Chartered Surveyors (RICS), told WPC News.
"Frankly, we have moved past what I thought were the major challenges," Mr. Creighton said.
"The biggest challenge in my experience is getting the commitment of all the entities to adopt it."
Current measuring standards vary widely from country to country, making it difficult to accurately compare and value property. Some markets might measure an office space from the inside of the wall; others from the outside. The patio of a luxury condo or a garage may be included in the advertised floor space in one country; but excluded in another.
"It's an embarrassing problem, frankly," Mr. Creighton said.
Creating standards will aide valuations, bringing consistency in pricing and financial reporting from market to market. The result will be "a more transparent marketplace, greater public trust, stronger investor confidence, and increased market stability," the group announced at a press conference hosted at the World Bank in May.
The coalition includes some of the largest industry organizations in the world, from the International Monetary Fund, the Building Owners and Managers Association and the International Real Estate Federation (FIABCI); to the China Institute of Real Estate Appraisers and Agents, the South African Property Owners Association and the American Society of Farm Managers and Rural Appraisers.
The Standards Setting Committee's next face-to-face meeting is scheduled for Sept. 18 in Brussels. Initial efforts are focusing on high rise office buildings, with industrial and residential to follow. Future efforts will focus on land and construction material.
"We will be looking at a number of different standards that are in use in various markets around the world," said Jones Lang LaSalle's Max Crofts, chairman of the Standard Setting Committee, in an e-mail to WPC News. "They will all be analysed in a neutral way in parallel with identifying the needs of the cross-border investors and multi-national occupiers."
All the involved organizations are "committed to the creation and implementation" of the standards, Mr. Creighton said.
While the standards group cannot force the industry at large to adopt the standards, all the member organizations have agreed to use them.
The standards will be implemented "because major players will immediately recognize the benefits, and the rest of the market will follow," Mr. Crofts said. "It will be an inevitable, but not overnight, progression."
For RICS members, "if you don't use the standard then you won't be a member of RICS," Mr. Creighton said.
The coalition is not pressing for a particular standard, members emphasize.
"As long as we do it the same way, it doesn't matter," Mr. Creighton said. "The market will demand this."
Dubai has become the first country to officially support international property measurement standards (IPMS) which aim to stamp out the problems created in the real estate industry by multiple measurement standards.
The announcement came following a meeting earlier this month between the IPMS Coalition and Dubai Land Department. As well as directly addressing inconsistency in measurement it is hoped that a shared international standard will bring both transparency and confidence to the market that adopt the IPMS.
The Dubai Land Department will form a committee to organise and coordinate their feedback and contribution to the standard setting process. ‘The insight from this important region will benefit IPMS greatly,’ said Ken Creighton, director of professional standards at the Royal Institution of Chartered Surveyors, one of the coalition partners.
‘We are proud of this achievement, which we see as being a quantum leap for the Dubai Land Department. Our involvement in this initiative supports our position in raising the benchmark for unifying surveying standards in Dubai,’ said Sultan Butti Bin Mejren, director general of the Dubai Land Department.
‘The efforts to unify surveying standards should benefit property owners and investors, as it will negate some of the issues and problems that can arise from differing standards used by real estate operators. It will support transparency and trust and will contribute to the convergence of global markets,’ he added.
A second affirmation for the initiative came in the form of the appointment of two new members to the IPMS Coalition, including its first Brazil based member, Secovi, along with US professional body, the Counselors of Real Estate (CRE). Secovi (São Paulo State Housing Syndicate) has been recognised as the home to the Brazilian real estate industry since 1946 and houses several key operating sectors of the real estate production and service chain.
The coaliton was created in Washington in May 2013 and it aims to resolve disparities by developing and implementing a set of international property measurement standards that are principle based and internationally applicable, and which will be adopted by all nations across the globe.
Alan Robertson, chief executive officer of Jones Lang LaSalle Middle East and North Africa said it is good news for the region’s real estate markets as for the first time investors will be able to use an internationally agreed standard methodology to measure property assets across the real estate market.
‘At the moment, real estate is measured differently between countries and even between different developers within the same country. This has resulted in the application of different measuring methods for calculating rentable or saleable areas,’ he pointed out.
‘For example whether to include balconies within the saleable area of residential units or whether common areas such as corridors and washrooms should be included within the lettable area of an office building. This creates confusion and a lack of transparency in the market and consequently makes it difficult for both tenants and purchasers to make informed decisions,’ he explained.
‘This is a problem both here across the Middle East where no common standards are used, making it difficult to compare between options on the same basis. This has a direct impact on transparency and what exactly investors are buying or what occupiers are leasing,’ he added.
Indeed, research by the firm shows there is a clear correlation between transparency and investment in the real estate market. ‘The adoption of a more structured approach to measuring buildings should therefore boost confidence and attract more investment into the regional real estate market. Jones Lang LaSalle MENA thoroughly endorses the new approach. We don’t believe there is a requirement to establish separate national codes but we do encourage government authorities and local developers to implement any new international measurement standards that emerge from this initiative,’ concluded Robertson.
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