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2000 Real Estate Situation : RICS, UK

(VAT News 1/2000 page 13)

Mr. Simon Kolesar
President, Royal
Institution of Chartered Surveyors (RICS)

Global Real Estate Industry in the Year 2000
    The global real estate industry should enjoy a buoyant environment in the next year or two, reflecting the strength of the global economy. The US economy remains strong, while both Asia and Europe are exhibiting signs of accelerating economic growth. Technological change and low inflation will mean property needs to be managed more intensively to raise returns, with investors required to focus much more on tenant requirements to prevent obsolescence.

2000 U.K. Real Estate Market
    The UK commercial property market will enjoy a firm recovery in tenant demand during the Year 2000, reflected in rising rental growth. The market will continue to suffer from a lack of available property, though there are signs that developers are beginning to engage in speculative development, particularly in London.
    The residential property market is expected to experience a slowdown in the Year 2000 as higher interest rates take some of the heat out the market. Residential house price inflation will stay above trend into 2000, but slow from end-1999 levels. High interest rates will impact on consumer demand and slow the pace of transactions. Shortages of property, especially in certain areas in the South East of England, will continue to characterise the market.

New Innovations in the Real Estate Industry for the 21st Century
    Computer processing power and increased access to information should ensure higher quality research, forecasting and planning in property and construction. Increased demand by tenants for property to be managed in such a way that services are also provided (i.e. facilities, IT support) will create increasing management responsibility. This could also necessitate a review of rents charged solely on an area basis, changing to an 'employment' or 'service provis-ion' basis in certain circumstances. Pressure will be exerted on valuation techniques to be stand-ardised across countries, contributing to increas-ing transparency of property as an asset class.

How to Improve the Thai R.E. Market
    I understand that the fundamental problem you have in Thailand is a cyclical oversupply in most property sectors following a period of rapid economic growth. Such problems occur in all countries, although the extent of the oversupply may vary considerably. There are a number of short term and longer term measures that can be taken by governments and the private sector to improve such situations. These fundamentally boil down to measures with two types of objectives: restricting new supply and stimulating new demand.
    In the case of Thailand, demand is likely to come back as the economy appears to be beginning to recover already, especially as interest rates are significantly lower than before. But a stricter planning code and enforcement would help reduce the likelihood of similar problems in the future. More immediately, there are clear advantages to encouraging investment demand at a time like this, especially as Thailand is such an attractive destination for international investors.

Cautions for Valuers
    Valuers in Thailand should perhaps reconsider the necessity of taking out Personal Indemnity (PI) Insurance, particularly in the aftermath of the recent economic turbulence. Valuers' clients may increasingly demand the assurance it provides in being able to claim against errant valuers.

For Thai Property Valuers
    The RICS (Thailand) has made some fairly detailed suggestions on how to develop the Thai appraisal industry in its White Paper (on Developing the Valuation Profession) for the Securities and Exchange Commission. These suggestions covered some of the institutional issues that will facilitate growth in the profession as well as mesures that should help improve education, standards, the availability of information and discipline. For valuers generally, I would say that as we enter the 21st century it is becoming increasingly important for valuers to appreciate that property is increasingly part of the global market place, and they need to understand the impact of monetary controls and international financial requirements, such as banks lending on an asset value. Valuers need to be alert to changes in valuation standards and techniques not only locally but on a world-wide basis. This is not always easy to do, but I know our RICS (Thailand) would be pleased to help provide access to the latest trends and developments to local professionals, as various RICS groups have always done in many countries throughout the world.

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