VALUED INSIGHTS

Invaluable Valuation Knowledge for the Real Estate Stakeholder

SERIES:
Beyond Borders: A Global Perspective of International Real Estate Valuation
CHAPTER
  1. Navigating Cultural Differences in International Valuation Practices
    (Published: June 27, 2024)

  2. Comparing Valuation Standards Across Different Countries
    (Available: July 16, 2024)

  3. The Impact of Global Economic Trends on Property Valuations
    (Available: July 23, 2024)

  4. Legal and Regulatory Challenges in International Property Appraisals
    (Available: July 30, 2024)

  5. Best Practices for Cross-Border Collaboration in Valuation Advisory
    (Available: August 6, 2024)

  6. Adapting Valuation Approaches to Diverse International Markets
    (Available: August 13, 2024)

  7. Understanding the Influence of Political Stability on Property Values
    (Available: August 20, 2024)

  8. Valuation Challenges in Emerging Markets: Lessons Learned
    (Available: August 27, 2024)

  9. Applying International Valuation Standards (IVS) in Practice
    (Available: September 3, 2024)

  10. The Interplay Between Currency Exchange Rates and Property Valuations
    (Available: September 10, 2024)

  11. Commercial Property Valuation in Developed vs. Developing Nations
    (Available: September 17, 2024)
SERIES:
Beyond Borders: A Global Perspective of
International Real Estate Valuation
CHAPTER:

Commercial Property Valuation in Developed vs. Developing Nations

Receive
Valuation Insights
in your Inbox

Author: Bruce D. Greenberg, FRICS | MAI | SRA | ASA | ARM
Published: September 17, 2024

The practice of commercial property valuation can vary significantly between developed and developing nations, reflecting the differences in market maturity, data availability, regulatory frameworks, and cultural contexts. Understanding these distinctions is crucial for valuation professionals operating in the global arena, as it allows them to adapt their methodologies and approaches to deliver accurate and reliable valuations across diverse market conditions.

Developed Nations: Mature Markets and Robust Data

In developed nations with mature real estate markets, commercial property valuation typically benefits from several advantages:

  1. Availability of Reliable Data: Developed markets often have well-established data infrastructure, providing access to comprehensive and reliable information on property transactions, market trends, and economic indicators[1].
Bruce D. Grennberg
FRICS | MAI | SRA | ASA | ARM
Managin Director | Principal
+1-480-440-2842 EXT 01
  1. Standardized Valuation Practices: Valuation standards and methodologies are generally well-defined and widely adopted, promoting consistency and transparency in the valuation process[2].
  2. Regulatory Oversight: Developed nations typically have robust regulatory frameworks governing valuation practices, ensuring compliance with professional standards and ethical guidelines[3].
  3. Market Transparency: Mature markets tend to exhibit higher levels of transparency, with readily available information on property listings, transactions, and market dynamics[4].
  4. Advanced Valuation Techniques: Valuation professionals in developed nations often have access to advanced valuation techniques, such as automated valuation models (AVMs) and sophisticated data analytics tools[5].

Developing Nations: Challenges and Adaptations

In contrast, commercial property valuation in developing nations often faces unique challenges:

  1. Limited Data Availability: Developing markets may lack comprehensive and reliable data sources, hindering the accuracy of valuations and necessitating alternative data collection methods.
  1. Evolving Valuation Standards: Valuation standards and practices may be in the process of development or adaptation, leading to potential inconsistencies or variations in methodologies.
  1. Regulatory Gaps: Regulatory frameworks governing valuation practices may be less developed or inconsistently enforced, creating potential compliance challenges.
  1. Market Opaqueness: Developing real estate markets can exhibit lower levels of transparency, with limited access to information on property transactions and market dynamics.
  1. Cultural and Local Market Nuances: Valuation professionals must navigate cultural nuances, local market practices, and varying perceptions of risk and value, which can influence valuation approaches.

To address these challenges, valuation professionals operating in developing nations often employ the following strategies:

  1. Collaboration with Local Experts: Partnering with local valuation professionals and industry experts who possess deep knowledge of the market dynamics and cultural nuances.
  1. Adaptation of Valuation Methodologies: Modifying and adapting valuation methodologies to account for data limitations, market imperfections, and local market practices.
  1. Emphasis on Due Diligence: Conducting thorough due diligence and on-site inspections to gather relevant information and validate assumptions.
  1. Incorporation of Local Market Studies: Conducting localized market studies and research to supplement limited data sources and gain insights into market trends and dynamics.
  1. Continuous Professional Development: Investing in ongoing education and training to stay updated on evolving valuation practices, regulatory changes, and emerging market trends in developing nations.

By recognizing the distinct challenges and opportunities in developed and developing markets, valuation professionals can tailor their approaches, leverage local expertise, and continuously adapt their methodologies to deliver reliable and context-specific valuations across diverse global markets.

Sources:

[1] Valuation Problems in Developing Countries: A New Perspective (Land, 2021)

[2] Property Valuation Practice In Developed Countries – A Case of Hong Kong (ResearchGate, 2018)

[3] Theory and practice of real estate valuation in developing countries (UCT, 2022)

[4] Asset valuation and business development in developing nations (Punch, 2023)

[5] Understanding the Impact of Current Economic Trends on Commercial Property Valuations (LoweryPA, 2023)

 Citations:

[1] https://www.mdpi.com/2073-445X/10/12/1352

[2] https://punchng.com/asset-valuation-and-business-development-in-developing-nations/

[3] https://www.researchgate.net/publication/326438786_Property_Valuation_Practice_In_Developed_
Countries_A_Case_of_Hong_Kong

[4] https://open.uct.ac.za/handle/11427/37410

[5] https://lowerypa.com/2023/11/28/understanding-the-impact-of-current-economic-trends-on-commercial-property-valuations/