A university don and head of department of Estate Management at the University of Lagos, Prof Gabriel Babawale, says the Nigerian property industry could face a huge risk of losing needed investments if stakeholders and relevant authorities fail to tackle the dangers of inaccurate estate valuation in the sector.
He made this submission at the 19th inaugural lecture in the 2021/2022 academic session he delivered at the University of Lagos on Wednesday.
In the lecture titled, ‘Valuation Accuracy: The Myth, Reality And Expectations’ Prof Babawale described Real estate valuation as the art and science of determining the monetary value or worth of an interest in a property at a given date and for a given purpose.
He said that estate valuation is an essential factor often required to make good investment decisions like sales and acquisitions, insurance policies, securitisation and the measurement of the historical performance of a property.
Hence, according to him, the dangers of inaccurate valuation have far-reaching consequences on Nigeria’s real estate sector. He stressed that valuation inaccuracies are not only a threat to the credibility and relevance of the estate valuation profession, but it also exposes valuers to liability for professional negligence.
“Most importantly, inaccurate valuation is inimical to the healthy development of the property market as it tends to undermine investors’ confidence in the operations of the property market. By sending wrong signals to property market participants, inaccurate valuations lead to suboptimal decisions, which may result in incalculable financial loss to real estate investors and financial institutions. Inaccurate valuations, therefore, jeopardise the future of the property industry,” he added.
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To protect Nigeria’s property market, Prof Babawale proffered strategies to curb the dangers of inaccurate real estate valuation, while urging the combined efforts of all stakeholders; the academia, regulatory bodies, practitioners plus the valuation end users.
He identified the need for a more information-driven valuation and called for stronger synergy between the regulatory authorities, valuation firms, relevant government departments and academics, on the collation and analysis of property transactions and performance and disseminating the findings via annual reports.
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“In view of the far-reaching consequences of inaccurate valuation in the economy, the state and federal governments, as the ultimate regulators, should provide for the office of the Valuer-General, as government independent authority on property valuation. One of the functions is to develop and maintain a comprehensive up-to-date database for property value audit and research purposes,” Prof Babawale said.
The UNILAG Estate Management lecturer also urged the regulators to drive public awareness campaigns that will popularise the services offered by real estate valuers. “The industry is presently too fragmented to make a meaningful impact or champion the required paradigm shift.
“The industry is dominated by sole proprietorship, predominantly localised and small-sized firms, while the services are largely unbundled. Valuation firms receive few valuation briefs and have limited exposure to international best practices. There are very few successful partnerships and no truly multidisciplinary firms. The influence of reputable foreign firms is negligible”.
Hence, regulators “should promote larger, multi-disciplinary firms through merger, acquisition and takeover as is currently witnessed in other professions. This is the global trend. The era of globalisation particularly underscores the need for larger firms that are better positioned to fund research, support standard -libraries, promote specialised skills, fund staff training and acquisition of necessary technology, provide better access to information/intra-firm communication and take advantage of innovations and resources, especially in IT for improved service delivery”, he added.
He further recommended improved skills and technologies deployed in valuation and reporting value. “Valuers are primarily property market analysts,” he said. So “market analysis without the use of statistics is a contradiction in terms. Given the dynamics of the marketplace and the growing sophistication of valuers’ clientele, valuers are well-advised to update their knowledge through continuous professional training, seminar, workshops and acquisition of industry-based software, etc”
Prof Babawale called on regulatory bodies like the Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) and the Nigerian Institution of Estate Surveyors and Valuers (NIESV) to consider additional regulations and more stringent codes of practice to sanitise and enthrone valuers’ independence and compliance with approved standards and ethics.
Furthermore, “the Nigerian property market is presently poorly researched. There is an urgent need for substantial funds dedicated to research and information dissemination. Findings from such studies would help to boost valuers’ confidence and help them to approach their tasks more resourcefully and professionally. lt will also win the confidence of investors, particularly foreign investors,” Prof Babawale said.
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