Valuers challenged on their future
Valuers must identify the long-run demand for their profession’s services and set entry standards accordingly or risk being merely time-paid artisans, keynote speaker Christopher Jonas told the Pan Pacific valuers’ congress in Auckland today.
Mr Jonas is a past president of Britain’s surveyors’ institute. Five years ago he set up his own boutique practice, where he consults on real estate strategy, independent directorships, private equity investment in non-property businesses, and unpaid work for the public good.
In his address he ran through the consequences of various points — the entry basis, fee structures, definitions of valuation and the huge impact he believes electronic commerce will have on property.
An important factor, he found, was that merchant banks had discovered property was respectable. “Now each one has a dedicated property team and, more often than not, a discretionary property investment fund. Banks are winning an increasing share of the large deals market.
“They and the deal-driven large commercial property firms are leaving the professionals to collect the time-based valuation or structural survey fees.
“Thus I see an increasing divide between very well paid deal makers for large profitable transactions and the journeyman professional, forced back to carrying out the more basic, almost artisan, functions.”
Mr Jonas said that as this developed, “no bright young graduate who can get into a Goldman Sachs will want to join even the best exclusively professional firms.”
On the issue of definition, Mr Jonas believes there should be one, not an ever-increasing list bound to cause confusion. He said valuers worked in total contrast to the old truism of buying from the frightened and selling to the greedy, by sticking to the c concept of open market value, “the notion that a certain price is the right one for both parties.”
By this method, freezing the moment of valuation, “he gives us no insight on where the value has come from, or the scope for the value moving in the future — and if so, in which direction.”
Mr Jonas says valuers need to apply more research to the relationship of property risk and return to the capital markets, and how property markets link to their surrounding economy.
But he believes e-commerce will give valuers their greatest fright, because it will bring huge shifts in occupier demand. He likes the prospect for warehouses (and this is apparent in Auckland, too, with strong growth in that sector).
“I would expect shopping streets to be the biggest losers as trade is siphoned away, with many units reverting to leisure, showroom or even residential uses.”
The enigma is the downtown office sector. “It is hard to see many wanting to work from home permanently, but there is similarly little need for office workers to travel into the major city centres just to do a job that can be done anywhere… One thing appears clear already. E-business is going to put pressure on the overheads of doing business the traditional way. Head offices will be in the firing line.”