By Elizabeth Broomhall
Emirate to clamp down on inflated property valuations, speed release of sales data
Dubai’s Land Department is set to turn a spotlight on cowboy real estate surveyors in a bid to clamp down on inflated property valuations, a senior official told Arabian Business.
Tighter rules will force out unqualified surveyors from the market in a move aimed at ensuring real estate valuations accurately match the worth of the property, said the official, who asked not to be named.
“We are working on legislation to allow us to regulate valuers and register them,” said the DLD official. “The date of release is yet to be confirmed, but we provided the draft legislation two years ago and we are nearly there.”
The agency is also hoping to speed up the release of property sale data to the market to allow buyers and surveyors to check asking prices with recent sales data.
“[We want to get] the transactional data out to valuers so they can check the sales in the last six months,” said the official. “If you don’t have it, that’s when valuers start using other formats.”
The collapse of Dubai’s property market has increased scrutiny on transactions after billions of dollars worth of developments were scrapped or put on hold in the wake of the financial crisis.
Houses sold at the height of the emirate’s speculator-fuelled real estate bubble have seen more than 60 percent wiped off their value as investors fled the market and property sales dwindled.
Dubai’s real estate watchdog, RERA, said in March it was reviewing the financial viability of about 90,000 properties due to be delivered over the next five years.
Many buyers who purchased property in the pre-2008 boom years have found their valuations were grossly inflation, leaving them facing huge mortgages or the risk of foreclosure.
“During the boom times, many banks and institutions were lending vast amounts of money to developers and speculators alike off the back of one or two-page valuation reports produced by non-professionally qualified valuers, who often gave opinions of worth as opposed to market value,” said Samuel Morris, real estate manager for the Middle East at Deloitte.
“Most of the mistakes made were swept under the carpet through rapid growth in capital value, but people are since starting to wise up to these cowboy firms.”
Many developers are opposed to tighter curbs on surveyors, fearing a backlash from investors whose properties will be worth significantly less than the buying price, he said.
“[Some developers] have historically sold real estate quoting a certain square foot or metre, not measured using an established methodology, and so in some instances they have included such things as flat roofs, garages, car parking bays and gardens within their measurements,” he said.
RERA enjoys years of mulling - First they were after cowboy real estate agents & now surveyors - What about the cowboy developers who were shooting from their hips at the height of the property market - Was RERA enjoying the show then
The quote that some developers are opposed to tighter curbs on surveyors is very disturbing. Given this first hand knowledge, I hope that the quotee has disclosed said developers to RERA in order that they are apporpriately educated by the authorities or, if necessary, further action taken.
In addition, surely an onus must be on the lending institutions to ensure a suitably qualified surveyor carries out the valuation - it is after all their money. Again, what represents a suitably qualified valuer is a matter of education to industry. Any move to a formal registration procedure would certainly assist in this in my view.
"surely an onus must be on the lending institutions to ensure a suitably qualified surveyor carries out the valuation - it is after all their money" Fi, you have hit the nail on the head. Most lenders now realise this, however it is surprising how many banks still do not perform their due diligence when instructing a valuer. Professional qualification such as RICS and suitable PI cover is vital.
It is good news that the land department will impose regulations on on the industry in an effort to flush out unqualified "valuers". Accurate valuations are the cornerstone of the real estate industry and lenders must realise that it is important to appoint a professionally qualified valuer, ideally a member of the RICS Registered Valuers scheme.
Last month British Arabian Chartered Surveyors became the first GCC company to fully embrace the scheme and enroll it's professionally qualified RICS staff.
I further query the statement that "most mistakes were brushed under the carpet" Does the quotee have actual evidence that there were mistakes and indeed the Banks relied upon non-qualified "professionals" at the particular time they issued funds? Again, if so, perhaps it would be useful to disclose this information to RERA. If there were, surely the lending instituations have recourse?
Further, historically, in certain circumstances a 2 page "Valuation Certificate" was permitted under International Valuation standards.
Finally, the fact that a developer has included certain areas in his calculation of price if of no concern. If there is a willing buyer at the price quoted then that is the market price.
In summary, I dont think the quote provided is not particularly helpful. Looking back and making general assumptions does not help us now. As I mentioned there is a need for education and a consensual approach between all parties regardless of past preceived "mistakes"
RERA and the Land Department should put together a pricing index for both property value and rental prices. They are still asleep since the recession hit back in 2008. As an Investor my money worth of 21 years work has gone into 2 properties that have devalued by more than 70 % from the peak and I am still seeing UAE CEO's talking about Cowboys instead of getting off their seats and getting out there to do something about it. Wake up, the recession is hard and long and may be we have 5 to 7 years ahead of hard work, so stop Dubai Properties and Nakheel from throwing cheap oversupply into the market, regulate both the sales and rental markets and protect Investors money from false developers, look into the residency Visa issues and put a stop on the nonsense of Mortgage companies chasing / jailing investors on bounced cheques.
I am sorry about your dilema. However, you are obviously an investor having purchased 2 units. As an investor, you will be aware that your investments can go up or down. It is now not the blame of the developer, the bank, the government etc etc that your values have fallen 70% - it was you and your decision that chose that investment. Clearly you believed that you would have high returns (having bought 2 properties) compared to other options at the time....that was your risk...and it seems you may have lost.
Going back to the main story, were you given an unrealistic valuation of your investments at the time (did they appreciate further?), or did you have an independent valuation carried out at all?
You hit the nail on the head! I am writing a book and looking for 15 homes from hell stories in the UAE market to add to my own personal stories - whether you are a buyer/seller or have worked for a real estate agency/developer please let me know - Dubai and Abu Dhabi as well please and possibly RAK. Cant go into to much detail here but grew up in the Middle East, was married to a GCC National and was in the real estate industry in the Gulf for 15 years till last year.