RICS: Increasing Confidence in South Africa Property Markets

LAGOS (Capital Markets in Africa) – In the extensive travel that I do in my role I get to talk to professionals and market leaders right across the UK, Europe, Middle East and Africa. I also get to talk to governments and policy makers. What is very clear to me is that for all these parties the Royal Institution of Chartered Surveyors (RICS) name promises the consistent delivery of standards – bringing confidence to the markets we serve.

We are taking a lead in developing and embedding international standards which are recognised throughout the world. These high-level standards sit across our profession, providing a common framework for all practitioners and other stakeholders.

Since 2013, we have been working with more than 100 other professional and standards-setting organisations throughout the world to develop high-level international standards. Collectively, these organisations own the standards which are implemented by each organisation through their own professional guidelines. We are implementing these new international standards through RICS Professional Statements.

RICS is a founding member of four separate coalitions, which are working to create the following standards for our profession:

International Property Measurement Standards (IPMS)
Property measurement standards differ drastically around the world. It means that the same building could be up to 24% different in size depending on the standard used. In an interconnected global marketplace, this inconsistency leads to confusion and risk for all property owners, occupiers and investors, especially those that operate across borders. Fundamentally it makes analysing property portfolios incredibly difficult.

More than 70 professional and standards bodies, including RICS, make up the IPMS Coalition, which will establish a common standard for measuring property, enhancing transparency and comparability in real estate. IPMS: Office Buildings was published in November 2014. IPMS: Residential Buildings was released in September 2016 and will be followed by versions for industrial and then retail property.

RICS Property Measurement, 1st edition updates the RICS Code of Measuring Practice, 6th edition and incorporates International Property Measurement Standards (IPMS).

International Construction Measurement Standards (ICMS)
The standards used to calculate the cost of construction projects differ markedly throughout the world. In simple terms, the ‘line items’ which make up the project cost total differ depending on where the project is being carried out. This makes it difficult to understand and compare project costs between markets. It also compromises our ability to interpret the social, economic and environmental ‘footprint’ of a construction project on a consistent basis.

Formed in 2015 the ICMS Coalition totals more than 30 professional and standards bodies from around the world. It is developing and implementing the first international standard for measuring construction costs. It will enhance transparency and help to de-risk investment in construction projects.

International Land Measurement Standards (ILMS)
Land tenure and ownership rights are a global challenge. Statistics show that some 70% of land and property in the developing world is un-registered and outside of formal markets which in turn has a direct impact on communities, wealth and our ability to effectively manage resources and the environment. Today, land measurement standards used to interpret and document tenure are at best inconsistent and at worst non-existent. RICS is one of the founding organisations setting up a coalition to address these issues. The Coalition was launched in June 2016.

International Ethics Standards (IES)
Despite the prevalence of quality ethics standards within our profession today, there is no agreed, internationally observed norm – something the medical and accountancy professions both have.

Initiated at a meeting hosted by the United Nations in 2014, a coalition of professional organisations in the property and built environment sector are collaborating to align ethics standards at the international level. The IES Coalition of over 60 organisations hopes to publish the standard in 2016.

Consistency in standards will help all stakeholders understand what they are getting which brings confidence to markets.

Valuation
Valuation is one of the key areas of practice for RICS qualified professionals. In order to ensure globally consistent standards in valuation, the institution publishes RICS Valuation Standards – also known as the “Red Book”, which are mandatory for RICS professionals and RICS regulated firms and apply the requirements of International Valuation Standards (IVS). The International Valuation Standards Council (IVSC) is an independent, not-for-profit organisation that produces and implements universally accepted standards for the valuation of assets across the world in the public interest.

In response to the last global financial crisis, RICS developed a regulatory monitoring initiative, known as Valuer Registration (VR), to ensure the consistent application of Red Book valuation standards worldwide.

Implemented as a mandatory scheme for all RICS members undertaking valuations in, inter alia, the UK, Netherlands, France, United Arab Emirates, Cayman Islands and Hong Kong, RICS Valuer Registration was launched in June 2016 and on a voluntary basis for any

RICS valuer practicing in South Africa. RICS Valuer Registration will become mandatory for all member valuers working in the field in South Africa from 1 February 2017.

The Valuer Registration scheme is intended to ensure confidence in the delivery of valuation advice and reinforce the highest professional standards in property valuation – a key component underpinning most economic activity. RICS main objective with this initiative is to reinforce the quality and accuracy of valuations while raising consumer confidence in the profession and, through effective regulation, minimising the risk associated with property valuations.

Valuer Registration provides key stakeholders in the property market with a clear designation that easily identifies the best regulated and qualified valuation professionals, as RICS members welcome complete transparency and open benchmarking against industry best practice. It follows that making this mandatory in South Africa from 1 February next year will reinforce transparency and enhance market confidence.

In a globally competitive business environment, internationally benchmarked property valuation standards are essential to facilitate greater transparency, and through effective monitoring, the Valuer Registration scheme will demonstrate compliance with existing international standards.

While RICS members are regulated, registered valuers are subject to a specific monitoring regime that begins as soon as members sign up to Valuer Registration. An automatic risk score is established for the individual member and should any risks come to light, RICS will conduct further enquiry, including checking information against Red Book requirements, processes and audit trails that the Registered Valuer has in place.

The South African valuation profession has made good progress in the implementation of global valuation standards in recent years but is under more scrutiny than ever. The additional transparency that VR seeks to offer is vital in ensuring the trajectory towards international best practice continues.

RICS has committed to support the development of property professionals across Sub-Saharan Africa through working in collaboration with local professional bodies and regulators – we want to bring our experience of international best practice to support the development of the continent. It is exciting to be part of that.

This article features in the November edition of INTO AFRICA Magazine, insights on Real Estate and Property Investment prospects and challenges in Africa.

Contributor’s Profile
Mark Walley, has the responsibility to shape the direction of RICS and to fully contribute to the leadership of the organisation. Mark is responsible for ensuring growth in the RICS’ EMEA (UK, Europe, Middle East and Africa) region and that new segments are developed.

Through a strong network across the EMEA region Mark is responsible for the gathering and understanding of market insight, using this to form and develop strategies based on evidence based assessments and priorities. There is a strong focus on engaging with members, especially regional chairmen and boards working with them, to establish delivery of agreed plans.

Mark joined RICS in February 2011 from the ifs School of Finance. Prior to that, he spent time in consultancy and had a 25-year career with Barclays. He is a Fellow of the Institute of Directors and holds a BSC (hons) in Banking and Finance.