Issues facing standardisation of property valuation practices: a case study of Suva, Fiji

Globalisation and increasing foreign property investments are compelling nations to adopt international practices for greater transparency and better governance. However, it is important to recognise that a number of smaller countries struggle to implement international frameworks and practices. Using a case study of property valuations in Fiji, this paper highlights the institutional, informational and technical issues in implementation of the International Valuation Standards (IVS). Property Valuations are a source of information for financial reporting as well as crucial investment decisions. However, valuation is regarded as a “matter of opinion subjective to an individual’s assessment of different factors” (Isaac, 2002, p. 7). As a result, valuation standards at national and international levels play important roles in the promotion of ethics, integrity and impartiality in valuers (Hemphill, Lim, Adair, Crosby, & McGreal, 2014). Controversy surrounding the field of valuation calls for a critical analysis of valuation theory and the creation of frameworks for members of the valuation profession to adhere to in their normal practices (Australian Property Institute, 2007). Anecdotal evidences found in Fiji highlighted the needs for standardisation to be implemented in the valuation sector (Myers, 2013). Not on par with international practices, the valuation profession in Fiji had been administered by the Valuers Registration Act 1986, which was only responsible for determining the suitability of approved persons for registration as valuers (ACT No. 7 of 1986, 1986). The Act lacked in-depth information on day-to-day valuation practices, code of conduct and standards. Thus there had been calls for the implementation of formal valuation practice standards in the country (Myers, 2013). This research was undertaken in an attempt to identify fundamental practices within current market valuations of residential properties in Fiji and identify issues hindering the adoption of IVS. The IVS is the most common framework of valuation standards adopted by many countries. It has over 85 institutional members in 58 member countries, making it the most widely followed valuation standard in the world (International Valuation Standards Council, 2014). Moreover, this is followed by the Royal Institute of Chartered Surveyors Valuation Professional Standards (Red Book) which fully adopts the IVS and is used in the United Kingdom and member countries (Hemphill, Lim, Adair, Crosby, & McGreal, 2014). These standards contain key terms upon which the bases for valuation practices are formed. These terms are globally understood and provide guidance to valuers. This study is essentially constructed using the pragmatic approach to research known as the mixed methods approach (Whittemore & Knafl, 2005). It uses quantitative data collection techniques and qualitative techniques to further understand valuer behaviour. A host of behavioural studies were utilised to understand valuers’ behaviour and subjective practices starting from Diaz (1990). Quantitative studies were utilised to identify the key value parameters used for the sales comparison, income and replacement cost approaches. The research employed questionnaires collected from 17 respondents of which 13 were registered valuers and four graduate valuers. In-depth structured interviews of four participants who were employed by government bodies, private organisations or institutions tasked with registration and administration of valuers in Fiji complemented questionnaire results. An unstructured informal interview was conducted with a civil engineer who had a quantity surveying background. A total of eight case studies were collected through involvement at a well-known valuation firm that was accepted into the valuation panel of all major banks in Fiji. These ensured comprehension of actual valuation practices, including difficulties faced from lack of available information databases in Fiji. Review of internationally recognised valuation standards and literature on valuation were used to identify gaps in local valuation practices where actual practices potentially deviated from any suggested normative standards in published practice guidelines. The objective was to identify gaps in valuation practices that could potentially hinder efforts towards standardisation i.e. the proposed adoption of IVS. The research identified the following issues facing standardisation of valuation practices. The first major issue related to the lack of valuation standards which provided valuers with too much subjectivity in justifying any valuation figure. Introduction of valuation standards would provide some form of methodology and guidelines in performing valuations. Furthermore, ethical standards would restrict valuers from deviating much from normative practices. Overall, standards would encourage compliance and provide a basis for measuring against valuers’ performances. However, this field will still require automation in its processes to improve standards of practice. Automation or software must be designed to suit Fijian valuation practices and made available to all practicing valuers to ensure uniformity in the processes and reporting of valuations. The second major issue facing standardisation was availability of adequate market transactions information. To support standardised practices in line with IVS requirements, information needs to be made readily available to valuers. This information must be collected, analysed and stored in information databases. In the presence of databases, valuers will use actual data therefore there will be fewer assumptions in valuations. It is envisioned if all valuers are provided one set of analysed market transactions information, then any adjustments made to that data by valuers will have to be justified. Therefore, in the presence of information databases, the onus will be on valuers to support valuations with factual data. To support easy flow of information, and database management, institutions that have property related information will be required to share data. For instance, institutions such as the Ministry of Lands, Fiji Revenue and Customs Authority, Real Estate Agents Licencing Board, Titles office, Reserve Bank of Fiji, and other institutions in possession of data will be required to contribute to the information databases. However, this requires significant investments in development of integrated information infrastructure as well as continued support from Government and its agencies for maintenance of systems and their contents. Thirdly, technical issues were identified as a barrier to standardisation of valuation practices. Technical information must be provided to valuers in the form of training and guidance through manuals, technical workshops and standards. All valuers must attend Continued Professional Development programs offered by the Fiji Institute of Valuation and Estate Management, or equivalent substitutes. Furthermore, users of valuation reports must be encouraged to demand valuation reports that conform to IVS reporting formats and methodologies. However, a lack of skilled personnel and human capital is deemed to be a hindrance that will persist to hinder the efforts of standardisation. All in all, this research is a pioneering study in the field of valuation in Fiji. It sheds light on the existing practices relating to current market valuations of residential properties and the issues facing adoption of IVS. It is expected that this study will be used by relevant authorities as a basis for further investigation and improvements in property valuation practices in Fiji. Moreover, it is envisaged this research will trigger more researches into how valuations are currently performed and how improvements can be made as well as how international standards are adopted in smaller country nations with limited resources and technical capabilities. Subject of the topic: Property Valuation Issues Facing Standardisation of Property Valuation Practices: A case study of Suva, Fiji Property Valuations are a source of information for financial reporting as well as decision making in land governance. Globalisation and increasing foreign property investments are compelling nations to adopt international practices for greater transparency and better land governance. However, a number of smaller countries struggle to implement such international frameworks and practices. Likewise, Fiji has long struggled with finding common ground concerning the standardisation of valuation practices. Some challenges facing the valuation industry to date include lack of information sources, guiding principles or standards, the need for automation, as well as legislative support to bring about improvements in land governance measures. Using a case study of property valuations in Fiji, this paper categorises key challenges as institutional, informational and technical issues in implementation of the International Valuation Standards (IVS). It is essentially constructed using the pragmatic approach to research known as the mixed methods approach (Whittemore & Knafl, 2005). It uses quantitative data collection techniques and qualitative techniques to further understand valuer behaviour. A host of behavioural studies were also utilised to understand valuers’ behaviour and subjective practices (Diaz, 1990). Findings from this paper helped build recommendations towards improving land governance procedures targeting institutional, informational and technical issues highlighted within.