Investigating the UAE residential valuation system Simon Huston, Ebraheim Lahbash Ali Parsa

PROJECT AIM An investigation into the United Arab Emirates Residential Valuation System (‘RVS’) The project diagnoses RVS issues and seeks improvements.

Issue Rapid development and economic diversification has opened up UAE residential markets BUT the RVS needs development in terms of: Institutional capabilities Institutional capabilities Valuation standards Valuation standards Trust Trust

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

Internal 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) Neighbourhood Neighbourhood + facilities+ facilities -pollution-pollution

Literature RICS, 2014, Global valuation standards, VPS 4 Bases of value, assumptions and special assumptions RICS, 2014, The role of international and local valuation standards in influencing valuation practice in emerging and established markets,, available at: R_130314_dwl_aj.pdf RICS, 2014, Red Book, New 9th Edition.Valuation Standards, Royal Institution of Chartered Surveyors 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 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. Crosby, N. (2000). ‘Valuation accuracy, variation and bias in the context of standards and expectations.’ Journal of Property Investment and Finance, 18 (2) :

Thesis phases

RVS Stakeholders Financial (FNB, HSBC, ADCB) Municipalities (DLD, DM, FM) Developers (EMAAR, Nakheel, Skyline) Occupiers Real estate agents /managers Profession

RVS SEM modelling

AreaSystems AspectReason 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 handlingCAPABILITIESData 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 outputTRUSTReporting frequency Information output/input TRUST1) Transparency 2) Completeness 3) Accuracy 4) Auditability 5) Relevance 6) Comparability 7) Clarity 8) Neutrality 9) Sustainability 10) Content 11) Inclusiveness Institutional capabilities

Preliminary findings Institutional capacity Institutional capacity PaperworkPaperwork Lack of collaborationLack of collaboration Governance (qualifications)Governance (qualifications) Principles Principles 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 databases etcLack of access to GIS / property databases etc

Conclusion UAE RVS research project contributes to: Sustainable residential market Sustainable residential market Institutional capabilities Institutional capabilities TechnologyTechnology ProfessionalismProfessionalism administrative processadministrative process Standards salience (awareness, use and personal knowledge of recognised standards) Standards salience (awareness, use and personal knowledge of recognised standards) Trust (internal and external in valuations) Trust (internal and external in valuations) Thank you!