| Sopon Pornchokchai
Managing Director
Agency for Real Estate Affairs
During the late 1980's to early 1990's, when real estate markets in Europe,
America and Australia were in a deep bust period, a big question was
raised over the professional reliability of valuers for over-valuing
properties. Hence, several corrective measures were introduced such as
professional indemnity insurance, closer controls by national professional
valuation bodies (which are mostly self-regulatory organizations) and
the like. In the late 1990's, Thailand experienced the latest bust and
Thai valuers were similary under question. Some of the doubts included
1) No public confidence in service standards or the ethics of valuers,
2) Lack of valuation education, 3) Insufficient information for proper
valuation and 4) Lack of common rules to govern valuers.
No public confidence in service standards or the ethics
of valuers?
The above phrase implies that
the valuation profession in Thailand is very inferior, which is untrue. In fact,
there are quite a number of knowledgeable, internationally-trained and widely-accepted
Thai valuers. In international valuation-related firms operating in Thailand,
valuation tasks are conducted by Thai valuers. The vast majority of Thai valuers
have never been involved in malpractice.
In western countries, independent
professional valuers were blamed becauase they failed to foresee the coming bust
and they valued most of the properties for transactions. In Thailand, bad debts
in financial institutions were due to the fact that most borrowers did not have
enough, or even no collateral at all. The management at financial institutions
issued the loans according to their own policies. In many critical cases, they
did not use (the opinion of) independent valuers.
In 1998, a Thai valuer was arrested
on a charge of over-valuing property in the Bangkok Bank of Commerce (BBC) scandal.
The situation of the valuation profession in Thailand would have been worse if
that arrested valuer was from a local Thai valuation firm instead of a very large
international property consultant firm. At present, professional liability insurance
has been introduced in Thailand. This will help prevent any unnecessary scandal.
Lack of valuation education?
Property valuation has an interdisci-plinary
approach. Thailand has excellent engineers, economists, accountants, statisticians
and the like to form a team to value properties. The body of valuation knowledge
is not as sophisticated or hi-tech as that of building satellites or inventing
drugs for AIDS. In turn, new techniques on Geographical Information System (GIS)
for Valuation, Computer-assisted Mass Appraisal (CAMA), Discounted Cashflow (DCF)
and Artificial Intelligence (AI) by neural networking in valuation have only
been developed within the last few decades. Thai valuers are also using these
new techniques.
In terms of producing new valuers,
since 1986, around 1,000 valuers were created by different institutions sponsored
by international institutions from the USA, Europe and Australia. It is expected
that during the next 5 years, over 1,000 valuers will graduate with a valuation
(under)graduate degree to serve the needs of the market.
In terms of the continuing professional
development (CPD) program, the Valuers Association of Thailand (VAT) initiated
the CPD Program last year. It is stipulated that professional valuers must attend
at least 16 hours of the CPD program each year to be eligible for the extension
of their professional practices. Every month, the VAT organizes the CPD program.
Occasional special training for valuers is also held.
Insufficient information for proper valuation?
It is a conventional belief that
most of the transaction prices reported at the offices of the Departments of
Lands are below the real prices in order to reduce payable tax. In fact, there
was a recent study conducted by an Australian consultant to the Central Valuation
Authority finding that the majority of reported prices were the actual transaction
prices.
A conventional proposal is to
disclose property transaction data in order to create transparency in a public
database for valuation. This implies that the ideal valuation would be based
on a mechanical approach of having plentiful official data. In fact, in developed
countries such as Australia where transacted prices are considered public information,
actual transactions of large commercial properties hardly ever happen. Investors
are not willing to disclose their transacted prices due to competitiveness reasons;
therefore, they buy or sell shares of the entities that own the properties instead.
In this case, they have no need to report their transacted prices.
Rich valuation practices must
regard the art of researching and the essence of data diagnosis and analysis.
To obtain reliable information for valuation outside of official sources, requires
the art of field survey, professional interview and in-depth research as well.
Data are crucial for decision-making but the art of diagnosis and analysis is
more essential. In the USA, a public economic indicator on housing starts was
available long before the 1991 property market crisis. In the very small nation
state of Singapore where the government controls the supplies of land and housing,
oversupplies are still inevitable. Due to speculative forces, any warning system
might not work well.
Lack of rules to govern valuers?
Actually, Thailand has the VAT
as the self-regulatory organization. 50 out of 55 valuation firms are under the
VAT. It has over 2,000 members and represents fee valuers, government assessors,
valuation educators and appraisers in financial institutions nationwide. Nowadays,
positive development initiatives by the VAT include the enforcement of valuation
standard practices in 1993, the approval of valuation firms for valuation for
public purposes since 1995, the announcement of valuation ethics in 1997, the
monthly CPD program since 1999 and the annual standard construction cost estimate
beginning this year. In the future, the VAT is planning to conduct a thorough
professional examination and ranking of valuers in accordance with their professional
expertise and experience.
There is also an attempt to regulate
valuers in Thailand. However, in any profession, self-regulation is more acceptable.
It should be mentioned that in the United Kingdom, there is no law regulating
valuation practices. RICS, as the self-regulatory organization, governs valuers.
So does the VAT in Thailand. Panacea programs of regulating valuers by an outside
(semi-)government body can hardly help solve the problem. It must be recognized
that development must begin from within. Long-term sustainable development of
the valuation profession in Thailand must come from self-regulatory practices. |
