Subject: Evaluation Accuracy and Variance: Compare and Contrast the handiness of Property Market Data in the UK and Nigeria and the Valuation Profession and see the possible impact this may hold on rating truth and discrepancy within each state.
The intent of this paper is to compare and contrast the handiness of belongings market informations in the United Kingdom and Nigeria. This paper besides considers the possible impact that rating truth and discrepancy may hold on the rating profession within each state.
The paper begins with definitions and general reappraisal of rating truth and discrepancy of belongings market informations and it ‘s handiness in the several states. The paper besides discusses a comparative analysis of rating truth and discrepancy between United Kingdom and Nigeria. The survey so assessed the possible impact that rating truth and discrepancy would hold on the rating profession in the U.K and Nigeria.
2 REVIEW OF VALUATION ACCURACY AND VARIANCE
The undertaking of finding any belongings value can be really strict due to assorted factors associated with the analysis required to give an accurate value of the belongings been valued. Harmonizing to Dunes, et Al ( 2010 ) , there is a lawful and peculiar procedure in which rating can be seen even though it does non do rating an exact scientific discipline it is hence a affair of sentiment. Besides there could be an component of prejudice in a rating procedure, depending on the nature of belongings been valued, the grounds for which the rating is been processed, the methodological analysis, and the market informations available, and the manner valuers looks at assorted facets of a belongings and so premises are formed to find the value of the belongings.
The term rating truth is use when mensurating the closeness of ratings to existent dealing monetary values. Discrepancies in Valuation, is about the measuring of disagreements in the ratings of different valuers who have worked on the same belongings. It can be said that, discrepancy in rating establishes the spread of values. Several surveies have shown that rating truth has ever been consisted with the finding of the difference between old ratings and subsequent dealing monetary values of belongingss Crosby, et Al ( 2003 ) .
Evaluation truth and discrepancy are on a regular basis seen together but each has its ain function in rating procedure. Harmonizing to Wyatt ( 2007 ) defines rating discrepancy has the differences found in the values of a belongings. He noted that inaccuracy and discrepancy are ineluctable in a rating procedure. A new phrase called rating uncertainness is used in acknowledgment of the troubles faced when finding the degree of uncertainness in rating. The degree of tolerance of uncertainness in the rating profession has been set out in the Guidance Note 1 of the RICS Valuation Standards – Global and UK. The following subdivision of this paper takes a expression at the Factors that influence the Inaccuracy of Valuation in belongings markets.
2.1 FACTORS THAT INFLUENCE THE INACCURACY OF VALUATION
The procedure of commercial rating is really complex and there are assorted grounds for its inaccuracy or state of affairss that influence its hazardous nature. Wyatt ( 2003 ) stated that rating procedure could see inaccuracy at any clip even right from the really get downing. From his observation, we can appreciate how valuers are affected when we examine the factors that contribute to the inaccuracy of the rating procedure so discrepancies can be reduced. Following Babawale ( 2006 ) the cardinal factors that influence the inaccuracy of rating are Property types and Property Markets ; Availability of Relevant Data ; The Assumptions in Valuation ; Valuer Behaviour and Biases ; Valuation Standard Manual ; Methods of Valuation ; These are discussed below in bend.
Property TYPES AND PROPERTY MARKETS
First, due to the complex nature of the object involved in rating, this can make chance for inaccuracy or discrepancy to happen during the procedure of transporting out ratings. In the instance of assets rating of Oando Nigeria Plc a transnational company or the Power Holding Company Nigeria Plc etc. which has several assorted belongingss all over the state, the rating of these companies belongingss has more inclinations of rating inaccuracy or discrepancy than residential edifices owned by persons. For illustration there was a study on Oando Nig. Plc. 2006 on Assets Valuation in which two prominent valuers submitted in Lagos that produced a discrepancy of over N1.5 billion originating from the corporate effects of little inadvertence, mistake in dimensions, mistake in findings, differences in rating procedure and methodological analysis. Oando Nig. Plc. Assetss are scattered over the whole state and comprise of Gas and Service Stations, Oil Fieldss, Warehouse, commercial and residential belongingss, undeveloped land, oiler farms, oilers for fuel, motor vehicles, ships etc.
Besides, the belongings market ca n’t be seen as a perfect market. This is because of the heterogeneousness nature of belongingss, gross revenues are non carried out every bit frequently as expected, there is no centralized trading topographic point etc. In the existent estate market values are really hard to foretell. The failure of valuers to determine or give an accurate worth of belongingss in the existent estate market has hence been called the restriction found in the rating profession ( Millington, 1985 ) . However, due to the nature of belongings, the constructions and its environment, valuers are non expected to foretell monetary value either exactly or precisely accurately ( Bowles et al, 2000 ) .
AVAILABILITY OF RELEVANT DATA
Evaluation analysis is impossible to accomplish without the handiness of relevant informations. In general informations handiness is critical in measuring value. However, in the existent estate market it is frequently hard if non impossible to obtain dependable informations. This is possibly due to secrecy in the market and/or the chap of aggregation of such informations. This in fact, is influenced by the phase of the market. For illustration whereas in the UK where the market is seen as a mature market with important degree of informations available, in the instance of Nigeria, a developing and/or an emerging market, valuers find it highly hard to entree information that are dependable. The cardinal ground is possibly due to the fact that information on belongings market is non publically disclosed by persons or proprietors of belongingss in the state ( secrecy ) . The conservative nature of the people in the revelation of such information has in fact, aggravated the state of affairs. Dillinger ( 1996 ) remarked that the belongings market in developing states is driven belowground by high dealing revenue enhancements and levies and by rent controls. Therefore, basic information on costs, outputs, rate of depreciation etc. required for accurate rating may be unavailable or the quality of informations obtained may non reflect the market.
THE ASSUMPTIONS IN VALUATION
Before a belongings is valued, the valuer needs to do some premises about the belongings. Based on these premises the terminal merchandise of rating is likely to differ from one valuer to another. Harmonizing to Baum and Crosby ( 1988 ) , it is ever the instance, that because of implicit in premises that are used in procedure of rating it can ne’er be perfect. In their ain words “ assessments can seldom be proved inaccurate for many grounds including the fact that all ratings are hedged by series of premises ” Some of the premises include particular buyers being excluded from consideration. The premise that the procedure is to the full exposed to the market is an vague market. Furthermore, it is besides assumed that there is limited or monetary value motion over the period when selling is contemplated, even though full exposure may necessitate a drawn-out market period in an epoch of altering monetary value. As a consequence of these premises, it is non possible for rating consequences to be the same as the free interplay of market forces.
VALUER BEHAVIOUR AND BIASES
Valuers behaviors could potentially impact rating consequences. Most valuers are faced with hard fiscal state of affairss, this in kernels force them to look for quicker ways in which to work out or run into their fiscal duties. Wyatt ( 2003 ) noted that the chief cause of rating discrepancy could be attributed to the personal character of the valuer and that even in UK the profession organic structure ( RICS ) has implemented more needed criterions as contained in the counsel notes, valuers still fail to roll up with fit ordinances. Harmonizing to Levy and Schuck ( 1999 ) they noted that ethical determinations have been seen to fundamentally depend on the single valuers and to some extent the house they work with and their degree of ethical civilization. This unethical behavior is normally caused by the competition among valuers in the belongings market. They further observed that although the valuers are saddle with the duty of giving an informed sentiment of value, but they sometimes move against the moralss of the profession in order to fulfill their clients at that place by accepting economic motive to avoid struggle over fees and for a speedy repetition concern. It could be a calculated act or done accidental.
VALUATION STANDARD MANUAL
In order to hold a comparable manner of rating across states it will be reasonable to hold standard manuals to be used by all parties. Harmonizing to the International Valuation Standard Committee ( IVSC 2001 ) rating criterions are critical in the meeting of the belongings and capital market largely in developing economic systems, due to the rushing gait in the globalisation of the investing markets, this farther emphasizes the demand for universally recognized criterions for composing the value of belongings. The RICS Red Book of the Valuation Standard Manual and the International Valuation Standard Committee contains mandatory guidelines that should be applied by its members. This papers is to advance consistent premise on which rating is provided and besides to enable professional competency in high criterion. So in instances where this manual is missing it impacts on the manner rating is carried out.
METHOD OF VALUATION
Another factor that influences differences in rating and their truth is the method usage. If you consider the current state of affairs of rising prices and instability of belongings markets whereby there is lifting degree of costs, including edifice costs, it will be inappropriate to utilize conventional rating methods in rating because estimations are non dependable. As noted by Aluko ( 1998 ) dual digit rising prices, intensifying edifice cost, new funding agreements, makes conventional rating patterns inappropriate and run a high hazard of bring forthing incorrect consequences. Although there are more vigorous ways of rating that are capable of accounting for different markets but valuer on the other manus prefer to utilize the traditional methods non sing the alterations that occurs in ages and buying power of the local and national tendencies and they have becomes even more disused, uneffective, and undependable when sing the assorted investing vehicles.
3 COMPARATIVE ANALYSIS OF EFFECT OF AVAILABILITY OF MARKET DATA ON VALUATION ACCURACY AND VARIANCE BETWEEN UK AND NIGERIA
The focal point of this subdivision is to compare and contrast rating truth and discrepancy between UK and Nigeria based on the cardinal factors antecedently discussed. As a preliminary to the analysis the subdivision starts with an appraisal of the differences of accomplishments within each of the chosen survey countries and how they impact on rating profession.
First of wholly, it is observed that discrepancy in rating estimations from different valuers is based upon the accomplishments acquired, the cognition required to transport out the rating procedure in order to take a valid determination ( Aluko 1988 ; Baum 1998 ) . While analyzing rating discrepancy in Nigeria, Ogunba and Ajayi ( 1998 ) it was observed that wrong usage of application method on the portion of some valuers is caused by their deficiency of experience and cognition. The Nigerian professional organic structure besides recognises that deficient preparation and lack in professionalism in the thick of members are normally the cause of dependability issues ( NIESV, 1998 ) . On the other manus in the UK, there are higher instruction establishments whereby the accomplishments of valuers can be improved. Training installations are abundant in the UK. There are besides professional organic structures that devote resources in fiting and developing to supply needed cognition, contrary to what is been portrayed above every bit in the instance of Nigeria. So the terminal consequence is that in the procedure of garnering informations for rating intents there will be more accurate informations in the context of UK compared to Nigeria.
In footings of professionalism, it could be said that rating in Nigeria and UK has similar professional organic structures in the name of RICS supervising rating activities. Evaluation is controlled in the UK by the Royal Institution of Chartered Surveyors ( RICS ) , and in Nigeria it ‘s the Nigeria Institution of Estate Surveyors and Valuer ( NIESV ) severally. It is necessary to give a short narrative of the formation of RICS as it was founded in 1868 and was registered by Royal Charter in 1881 ( RICS, 2009 ) . This has brought about RICS guaranting professionalism in the pattern and been able to supervise the rating procedure. Professional unity is ensured by RICS and above all the funding of the survey of rating truth, conducted utilizing IPD informations ( Wyatt, 2007 ) . Nigeria being a former settlement of Britain adopted the professional attack of RICS in many of their rating patterns. However, rating inaccuracy and discrepancy are inevitable due to other conditions besides professional competence and biases whether in UK or in Nigeria. This was acknowledged by RICS as a challenge. They have hence realised the kernel of this and provided a model on rating uncertainness under its Guidance Notes ( GN1 ) as contained in the Red Book ( 2011 ) . In which instance the professional attack does non compromise on the truth of the information that is been used to measure rating. In the instance of Nigeria nevertheless, some factors tend to impact the use of appropriate informations, such as the influence of client as discussed in a old subdivision.
4 CONCLUDING Remark
This paper has considered the definition of the constructs of rating and its truth. It so discussed the assorted factors that influence rating truth and discrepancy. It is observed that differences in rating truth and discrepancy are influenced by factors including the methods used, handiness of informations and human factors and prejudices. Whiles constructs and theoretical elements have been discussed the paper so looked at the cardinal factors that affect differences in rating truth between Nigeria and UK. The handiness of informations and how it is collected is perceived as a major difference between the two instance survey countries and therefore in this instance the deficiency of equal preparation in the instance of Nigeria impact negatively on truth compared to the UK. Finally it is observed that the degree of professionalism between the two instance survey countries, although governed by similar professional organic structures, there are certain failings in the instance of Nigeria where much of client influence is seen as impacting so much on rating truth and discrepancy compared to UK. By and big, rating in both instances has typical processs but there are mostly common properties between the instances under reappraisal.