NST news: YARDSTICKS?: Increasing cross-border property - TopicsExpress



          

NST news: YARDSTICKS?: Increasing cross-border property transactions have led to a proposal for a global property measurement standard by International Property Measurement Standards (IPMS) With the globalisation of property markets, more property buyers are looking outside of their home countries for investment opportunities. Nowadays, it is getting more common for property developers from overseas such as the United Kingdom and Australia to market their products aggressively in Malaysia. That is one of the main reasons behind the recent announcement that the International Property Measurement Standards (IPMS) coalition has selected 19 real estate experts from around the world to join its SSC (Standards Setting Committee) to develop a global standard for measuring property. IPMS, of which APREA (Asia Pacific Real Estate Association) is a founding member, was established at a meeting hosted by the World Bank in Washington in May 2013. Property is measured in many different ways around the world and depending on the standard used, the floor area measurement can vary drastically. For example, according to IPMS, in Spain, floor area measurements of residential properties often include outdoor swimming pools. In parts of the Middle East, floor measurements can include actual and hypothetical areas. In India, floor measurements can include off-site car parks or parking spaces as well as common areas. Different measurement standards yield multiple outcomes and research by Jones Lang LaSalle suggests that, depending on the method used, the size of the same property can deviate by as much as 24 per cent. True comparison Among the 19 SSC members is Prof Sr Dr Ting Kien Hwa, Centre for Real Estate Research, University Teknologi MARA (UiTM). According to Ting, there is a need for international property measurement standards because property around the world is measured inconsistently. As a result, there is no true basis for cross-border comparison, transparency and self-regulation. Ting reveals that initially IPMS will be focusing on standards for office buildings and targets to have a draft ready by early 2014. This will be followed by standards for residential high-rise buildings. “The creation of international property measurement standards will not only give us a true basis of comparison, but will also act as a key factor in creating greater transparency within the industry and reducing the risk of external regulation. While there are many standards of measurement, no internationally recognised and shared property measurement standards currently exist,” explains Ting. The UiTM professor also says that like international standards such as International Financial Reporting Standards (IFRS) and International Valuation Standards (IVS), IPMS seeks to create a consortium and standard-setting process necessary to create a truly international standards. Addressing inconsistencies “Much of the world has adopted IFRS. For consistency and continuity in financial reporting, IFRS should be supported by a globally adopted IVS. Just as valuation standards support quality financial reporting standards, quality property measurement standards should be used to support consistent valuations. International measurement standards are needed to support quality international valuations and financial reporting. “We want to create this process, with other leading industry organisations such as professional bodies, governments, companies and academia, to create a world-class standard-setting process for international measurement standards. While the need for measurement standards extends beyond property, we believe property measurement has clearly definable inconsistencies to be addressed. Moreover, consistent standards of property measurement can have a direct positive impact on the quality of valuations and financial reporting,” opines Ting. How could all these affect property investors in the future? Ting says that IPMS will greatly enhance transparency on the measurement of buildings, for example net lettable areas, as countries that adopt IPMS will facilitate comparison on a like-with-like basis. International investors and MNC (Multinational Corporations) occupiers will be able to compare cross-border transactions easily with the confidence that the measurements are the same. Thus, Ting continues, if the local property players were to adopt IPMS, it would put the Malaysian property market at par with other countries that adopt IPMS. This is a similar situation to countries that have adopted IFRS whereby the corporate financial statements are easily understood and comparable by international investors and decision-makers. “Property investors will enjoy consistent standards of property measurement that is comparable internationally. Consistent measurements can have a direct positive impact on the quality of property valuations and financial reporting,” says Ting. When asked about these IPMS developments, several property industry figures have expressed their support for these global property standards, but admit that there would be challenges. Cohesive adoption K.H. Sim, Chairman of Allstones Group Asia Sdn Bhd feels that the main challenge would be fostering an understanding amongst property players and stakeholders to cohesively adopt and implement the new standards. “Before taking that next step forward, local governments, regulatory bodies and councils will also have to come to a consensus and commit to understanding the need and functions of the proposed measurements. Different countries now measure built-ups of units differently. For example, corridors to apartments are calculated as the apartment built-up in some countries while in Malaysia, we calculate based on what is inside the unit and the rest as accessory parcels or common area,” the Allstones Group Chairman elaborates. Sr James KM Tan, Associate Director of Raine & Horne agrees with Sim, citing the fact that different authorities and professions have different area definitions. For example, architects have a different definition of floor areas compared to the one issued by RISM (Royal Institution of Surveyor Malaysia) and this confuses the public. James KK Tan, Project Director of Suntrack Development Sdn Bhd notes that public education would be essential to inform them of the different expectations and perceptions. As a whole, KK Tan says that these standardised measurements should benefit the local property market as it would make things more transparent, consistent and reliable, and increase confidence among local and international property purchasers. See Kok Loong, Director of Metro Homes Sdn Bhd observes that property investors will also be able to gauge the rates, types of property as well as the potential profitability of the projects more effectively. Micro vs macro Nevertheless, not everyone in the industry is convinced that an international property standard is necessary. Dr Ernest Cheong, Chartered Surveyor, Registered Valuer, Auctioneer, Arbitrator and Principal of Ernest Cheong PTL, feels that these changes will not work because although different countries have different systems of measurements, property buyers will still stick with what they have been doing for many years, which seems to be working quite well. “Look at the difference between the metric and imperial measurement systems. Even though there is still confusion, people have learned to live with them and just convert them as and when they need to. Investors don’t really go down to micro details. Bankers and accountants will go micro, but investors and entrepreneurs will usually go macro. They will do their own research on a particular property. If it’s a foreign property, they will do some currency or measurement conversions, evaluate the economic conditions of that particular country and seek help from experts or consultants. After that, they will go based on their gut feeling whether or not to buy the property. They won’t go too technical,” explains Cheong. The chartered surveyor elaborates further that property investment doesn’t depend only on arithmetic but also on the economic realities and other dynamics of the property’s host country. At the end of the day, concludes Cheong, after the potential of a property has been calculated, the five to 10 per cent differences in valuation due to different measurement systems will not be too critical when making the final purchasing decision. Cheong… “Property investment doesn’t depend just on measurements but also on the economic realities of the country.”
Posted on: Sat, 24 Aug 2013 02:19:36 +0000

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