[SINGAPORE] A new property measurement standard, which will standardise the way valuation is conducted around the world, could be rolled out as early as June next year, following the formation of the first International Property Measurement Standards Coalition (IPMSC).
The draft of this first standard, which will target office space, is being finalised by the standards setting committee, and will likely be sent out for consultation in January next year before it returns to the coalition for approval, hopefully in June or July next year, said Michael Newey, president of the Royal Institution of Chartered Surveyors (Rics).
"In theory, if you are valuing a building here in Singapore, and you're valuing a building in Hong Kong, and one in London or Sydney, it's the same methodology. The problem is that properties are measured in hugely different ways around the world," said Mr Newey.
Using residential property valuation as an example, floor space in Spain would include outdoor swimming pools, while in parts of the Middle East it would include the hypothetical maximum number of floors that can be built on existing foundations, said Mr Newey.
In India on the other hand, there is no standard measurement basis, and residential and commercial property are sold or leased on the basis of "super area", said Sachin Sandhir, managing director for Rics South Asia.
Given that the super area includes common areas and amenities including lift lobbies, terraces and common spaces, there can be a difference of anything between 25 per cent and 50 per cent between the super area and the actual usable area, he said.
The same problem occurs when measuring commercial property space across countries.
Using Rics net internal area - the standard used in the United Kingdom - as a base, "leased area", depending on where in the world you are looking at it, can vary by up to 24.1 per cent according to Jones Lang LaSalle's global leased space comparison tool.
This is largely due to the various elements, including columns, floor lift lobby, lifts and other common areas, which can potentially be included in the standard leasing practice of different countries.
Looking at it from a valuation standpoint, this undermines the issue of transparency and introduces a risk element to the valuation, said Mr Newey.
"This means you have a risk element to whether the financial reporting of companies' assets particularly were correct," he added.
It is for this reason that the IPMSC was created in May this year - to address the creation of international property measurement standards (IPMS).
To date, more than 20 professional bodies from around the world have joined the coalition and have undertaken to adopt the standards. In addition, Dubai was the first government to officially support the IPMS in September this year.
Mr Newey said that he had a "positive meeting" with the Urban Redevelopment Authority, to raise awareness.
Following the roll-out of office standards, the coalition will look into other commercial assets including retail, warehousing and industrial. This will culminate in the creation of valuation standards for residential property in 2015.
Source: Business Times, 14 Nov 2013