Advice and Opinion Mauritius

Real estate valuations in Sub-Saharan Africa

Real estate valuations provide an indication of property values, usually the market value – which is the most probable price that the property will bring in a competitive and open market.

According to Roger Hunting, Director: Broll Valuation and Advisory Services, property valuation is the cornerstone of real estate business.

He explains that real estate transactions require valuations, but properties vary in type and location, and the characteristics of a property have an important bearing on the determination of value.

Valuations of immovable property are required for financial statements, secured lending purposes, insurance replacement cost, listing of property funds, disposals and acquisitions, as well as taxation, and are used by parties to agree on the market value of an immovable property.

Based in South Africa, Broll Valuations and Advisory Services have a joint partnership with Broll Africa operations.

There are challenges in undertaking valuations in Sub-Saharan Africa as there are certain restrictions placed on the appointment of valuers to undertake valuations for financial statements and those prepared for statutory purposes unless the client and their auditors are happy that a non-registered valuer within that territory can undertake such valuations, according to Hunting.

“These restrictions do not normally apply to valuations undertaken for international corporate clients, provided that they have been made aware of such limitations,” he says

Hunting advises that while the practises and principles of real estate valuations are generally well established globally, the generics of such have to be tailored to suit individual markets, and what is considered as the norm in real estate markets within South Africa can vary elsewhere in Sub-Saharan Africa.

It is for this reason, that the Broll Property Group Valuations and Advisory Services will hold a three day convention and workshop to share knowledge and expertise on real estate valuations in Sub-Saharan Africa.

The event takes place from Monday 27 October to Wednesday 29 October at the Protea Hotel Fire & Ice in Melrose Arch Johannesburg in South Africa.

Delegates will include valuers from Broll offices in South Africa, Ghana, Kenya, Malawi, Mauritius, Nigeria, with a special guest, Graham Hughes, Executive Director: CBRE Limited Valuation & Advisory Services International from London in the United Kingdom.

Broll’s affiliation with CBRE allows the Group and in particular Broll Valuation and Advisory Services to access current market knowledge and research, as well as keeping up with the latest developments in valuation methodology and ideology.

Hunting says Broll valuation & Advisory Services comply with international best practice as set out in the RICS Valuation – Professional Standards (9th Edition) known as the “Red Book” and the guidelines adopted by the International Valuation Standards Committee.

While the gathering is not meant to prescribe how valuations should be undertaken, Hunting anticipates that the event will provide a platform for debate with the object of providing a consistency of approach in relation to methodology and reporting format for valuations.

“With an increasing appetite by investors in the Sub-Saharan Africa real estate markets, it is critical that the reporting standards comply with global practises.”

Hunting notes that as the Broll Property Group continues to expand into Africa, there are increasing requests for valuation services for hotels, undeveloped land with development potential commercial and major retail properties, and with varying market practises, such valuations present a challenge.

“The essence of valuation reporting carries an element of risk, if your get the value wrong, this is considered negligence, hence the management of risk especially with real estate investments in Sub-Saharan Africa is critically important.”

It is therefore essential to understand the client’s requirements and brief right from the start.

This means asking pertinent questions such as the purpose and reason for the valuation (is the client wanting to sell or buy a particular property and is it for secured lending or financial statements), the nature of the property (this could be an office building, a retail centre or hotel for example).

As in real estate investments, understanding the different markets and their challenges make for better decision making and the three day event will allow delegates to share insights and challenges in some of the Sub-Saharan African countries.

Some of the topics to be discussed include risks associated with valuations and risk management, case studies on shopping centres, commercial properties and hotels and delegates will be treated to a property tour around Johannesburg.