A COALITION of global bodies will meet the World Bank to come up with a universal method of valuing real estate across the globe that will bridge language barriers. So the system of assessing property values in Australia will be no different to Asia, Europe, Africa, Middle East or North and South Americas.
For the first time ever, the world’s leading property institutions will meet to formulate a method of measuring property assets in a bid to tackle the problem of low investor confidence in property and its negative impact on financial markets.
The Royal Institute of Surveyors (RICS) led International Property Measurement Standards Coalition which also includes the Australian Property Institute and Builders and Owners Management Association (BOMA), will meet the World Bank at Washington DC to propose the implementation of a universal standard of property measurement.
According to RICS, such standards will ensure global consistency which will lead to fewer instances of fraud, a more transparent market, greater public trust and increased economic stability for investors.
“At present, the way property assets – such as a housing development or shopping centre – are measured varies wildly from country to country,” RICS director of professional standards Ken Creighton said.
“With so many different methods of measurement available, it makes it difficult for those looking to invest in these developments to compare like with like.
“This confusion can affect property values, lead to errors in financial reporting and, consequentially, undermine market confidence,” he added.
RICS pointed out some examples of this inconsistency — the way in which floor space is calculated.
In Spain, floor areas have been measured to include outdoor swimming pools; in parts of the Middle East they can include the hypothetical maximum number of floors that could be built on the existing foundations.
And in Australia, measurements have included outdoor parking spaces, even when they are not physically adjoined to the property itself.
“The IPMSC aim is to resolve disparities by developing and implementing International Property Measurement Standards, a set of standards for measurement that are principles based and internationally applicable, to be adopted by all nations across the globe.
“This is a groundbreaking initiative which has the potential to deliver huge benefits, both to real estate markets and to the economies and the populations they support around the world, by creating a level playing field for the way property is measured, valued and ultimately reported in financial statements,” Creighton said.
The Australian Property Institute national president Philip Western welcomed the initiative to establish the coalition and its goal of creating a universal method of measuring property assets.
“The adoption of internationally recognized standards will significantly benefit all operators in what is now a global market. A consistent global approach through the adoption of best practice will ensure transparency and performance comparability not previously seen in the market place,” Western said.
Real Capital Analytics executive managing director in New York Steve Williams said the accurate recording of land, building and floor area measurements is fundamental to market transparency.
“Transparency in turn is a catalyst to the global capital flows that underpin the provision of adequate shelter, food and clothing to the world’s growing urban populations.
“With the exception of language, it would not be an exaggeration to characterise global measurement protocols as the most urgent outstanding issue in the pursuit of global market transparency and performance comparability,” Williams said.
Westfields Consultoria Empresarial Ltda in São Paulo Brazil Ramsey Trados said the inconsistencies in the commercial real estate measurement standards in Brazil have been responsible for confusion in the mind of space users, developers and investors.
“The discrepancies as to how space is measured can only further the distortions in values and overall definition of space. There is no doubt that unless there is an internationally recognized measurement standard, there can be no real internationally homogeneous standard of value,” Trados said.
Property Review
