Investigating the UAE Investigating the UAE

residential valuation residential valuation systemsystem

Simon Huston, Ebraheim LahbashSimon Huston, Ebraheim LahbashAli ParsaAli Parsa

PROJECT AIMPROJECT AIM

An investigation into the United Arab An investigation into the United Arab Emirates Residential Valuation System Emirates Residential Valuation System (‘RVS’)(‘RVS’)

The project diagnoses RVS issues and The project diagnoses RVS issues and seeks improvements.seeks improvements.

IssueIssue

Rapid development and economic Rapid development and economic diversification has opened up UAE diversification has opened up UAE residential markets BUT the RVS needs residential markets BUT the RVS needs development in terms of:development in terms of:Institutional capabilitiesInstitutional capabilitiesValuation standards Valuation standards TrustTrust

External market drivers External market drivers Geopolitical uncertaintyGeopolitical uncertainty Regional growth/declineRegional growth/decline Capital flowsCapital flows Migration Migration Oil price volatility Oil price volatility Global investment market sentiment Global investment market sentiment

Internal fragmentationInternal fragmentation

Administration (Emirate?)Administration (Emirate?) Tenure (locals vs. foreign buyers)Tenure (locals vs. foreign buyers) Encumbrances (pipelines)Encumbrances (pipelines) Building quality Building quality Financial indicators (occupancy, rent)Financial indicators (occupancy, rent) NeighbourhoodNeighbourhood

• + facilities+ facilities• -pollution-pollution

LiteratureLiterature1. RICS, 2014, Global valuation standards, VPS 4 Bases of value, assumptions and

special assumptions.

2. RICS, 2014, The role of international and local valuation standards in influencing valuation practice in emerging and established markets,, available at: http://eprints.ulster.ac.uk/29529/1/MAIN_REPORT_Global_Valuation_Standards_FR_130314_dwl_aj.pdf

3. RICS, 2014, Red Book, New 9th Edition.Valuation Standards, Royal Institution of Chartered Surveyors.

4. Heps and M.Vatansever, 2011, ‘Forecasting future trends in Dubai housing market by using Box-Jenkins autoregressive integrated moving average’, International Journal of Housing Markets and Analysis, Vol. 4 No. 3, pp. 210-223.

5. N. Crosby and C. Hughes. “The basis of valuations for secured commercial property lending in the UK” Journal of European Real Estate Research, 2012, vol. 4, issue 3, pp. 225 – 242.

6. Crosby, N. (2000). ‘Valuation accuracy, variation and bias in the context of standards and expectations.’ Journal of Property Investment and Finance, 18 (2) :130-161.

Thesis Thesis phasesphases

RVS SEM modellingRVS SEM modellingKey: Ovals depict latent variables linked to at least 3 measured variables (rectangles), each with an associated error term (circles)

Source: Authors (2015), adapted from Streiner, D. (2006) Research Methods in Psychiatry Building a Better Model: An Introduction to Structural Equation Modelling

RVS

robustness

Stakeholder

trust

Standards

salience

Capabilities

DSS (GIS + model)

Qualified staff

Governance

Dissemination

Awareness

Usage

Accessibility

Credibility

Transparency

C1

pa

C2

pa

C3

pa

S1

pa

S2

pa

S3

T1

pa

T2

pa

T3

pa

Low dispersion

High dispersion

Area Systems Aspect Reason

Valuation

purpose

CAPABILITIES Stakeholder’s identified and valuation base (MV, IV, RV or MGV is

clear so that the reporting entity provides client decision useful

information.

Technology &

data capture

CAPABILITIES

 

Primary data is securely and systematically captured to provide

necessary details for robust valuation:

1) Date of valuation 2) Location

3) Legal matters (title, lease, encumbrances)

4) Property characteristics and conditions

5) Locales details

6) Performance indicators 7) Valuation

Data handling CAPABILITIES Data is analysed by competent people, using latest technologies.

Principles of

valuation

STANDARDS

SALIENCE

Valuation standards are disseminated and professionals conduct

valuations who are knowledgeable about:

1) Scope (period) 2) Materiality

3) Measurement 4) Prudence

Reporting output TRUST Reporting frequency

Information

output/input

TRUST 1) Transparency 2) Completeness

3) Accuracy 4) Auditability

5) Relevance 6) Comparability

7) Clarity 8) Neutrality

9) Sustainability 10) Content 11) Inclusiveness 

Institutional capabilitiesInstitutional capabilities

Preliminary findingsPreliminary findings Institutional capacity Institutional capacity

• PaperworkPaperwork• Lack of collaborationLack of collaboration• Governance (qualifications)Governance (qualifications)

PrinciplesPrinciples• Low salience valuation standardsLow salience valuation standards• Lack of confidence in market reportsLack of confidence in market reports

Intelligence Intelligence • Lack of access to GIS / property Lack of access to GIS / property

databases etcdatabases etc

ConclusionConclusion

UAE RVS research project contributes to:UAE RVS research project contributes to:Sustainable residential market Sustainable residential market Institutional capabilitiesInstitutional capabilities

• TechnologyTechnology• ProfessionalismProfessionalism• administrative processadministrative process

Standards salience (awareness, use and personal Standards salience (awareness, use and personal knowledge of recognised standards)knowledge of recognised standards)Trust (internal and external in valuations)Trust (internal and external in valuations)

Thank you!Thank you!