By creating a level playing field for the way property is measured, valued and reported in financial statements we’re likely to see a more stable global market
Back in May we brought together some of the world’s leading property institutions at the World Bank in Washington DC to discuss an issue that has been hampering the property industry for some time. The issue was that of measurement and, more specifically, how property is measured in different markets across the world. At the moment, the way property assets are measured varies wildly from country to country and it can cause considerable problems for the investment community and occupiers alike.
In Spain, for instance, floor areas have been calculated to include outdoor swimming pools; in parts of the Middle East they can include the hypothetical maximum number of floors that could be built on the existing foundations; and in Australia, measurements have included outdoor parking spaces, even when they are not physically attached to the property itself.
These standards have the potential to deliver huge benefits, both to real estate markets and to the economies and the populations they support around the world
This inconsistency and confusion makes it difficult for investors to compare like with like. This confusion can affect property values, lead to errors in financial reporting and, inevitably, undermine market confidence. None of this is good news for a property-reliant global economy that is at long last beginning to work its way out of the downturn.
It is for this reason that we brought together the International Property Measurement Standards Coalition (IPMSC) – a taskforce now totalling 22 of the world’s biggest institutional players, including the IMF – in order to create a universally applicable standard for floorspace measurement. The first phase of this project is addressing office floorspace and has been extremely well received by the global marketplace. In fact, only last month, US-based Counselors of Real Estate and the Brazil-based Secovi-SP joined the coalition. In addition to this, Dubai recently became the first national government to publically support the initiative and is looking to adopt the standards when they are published next summer.
These standards have the potential to deliver huge benefits, both to real estate markets and to the economies and the populations they support around the world. By creating a level playing field for the way property is measured, valued and ultimately reported in financial statements we’re likely to see a much more stable global market. This can only bode well for the future.
So, this is all well and good but what does it mean for the construction sector? Well, quite simply, these standards will prove vital. One of the coalition’s hopes is to extend these principles beyond floorspace. So, in the not too distant future we’re likely to see these standards extended to the likes of construction projects and, potentially, all areas of the built environment. And, once we have access to comparable and consistent data, investors looking to finance construction and infrastructure projects right across the world will have much greater certainty in projects and, therefore, confidence in their investment. With global capital flows, no country is an island unto itself and it is increasingly illogical that different methods of measurement should be used in different geographical territories. One global standard will eventually become the norm.
Sean Tompkins is chief executive of the RICS
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