The response of Nigerian valuers to increasing sophistication in investors' requirements
| Published date | 13 February 2007 |
| Pages | 43-61 |
| Date | 13 February 2007 |
| DOI | https://doi.org/10.1108/14635780710720162 |
| Author | O.A. Ogunba,C.A. Ajayi |
| Subject Matter | Property management & built environment |
The response of Nigerian valuers
to increasing sophistication in
investors’ requirements
O.A. Ogunba and C.A. Ajayi
Obafemi Awolowo University, Ile-Ife, Nigeria
Abstract
Purpose – The purpose of paper is to show how the changing property investment landscape in the
past 40years – for example the newrequirements of valuationaccuracy, rationalityand the risk analysis,
etc. – requires a corresponding responsefrom property valuers (academia, professionalsand regulatory
institutions) in technique development. The issue has however not received sufficient examination in
African real estateliterature. This study aims to address theconcern with a focus on Nigeria.
Design/methodology/approach – The paper reasoned that the process of Nigerian technique
development and assimilation into practice could be motivated through a study of issues that triggered
off transition towards sophistication in the parent valuation profession in the UK. Accordingly, the
paper worked out a seven-stage model of UK valuation transition in the past 40 years, and used this in
diagnosing the level of progress achieved in the Nigerian valuation Industry in the areas of accuracy,
rationality and risk analysis.
Findings – The results showed that technique development of is presently largely restricted to the
valuation academia, which has been making attempts to persuade practitioners and regulatory
Institutions to higher sophistication. Generally, the paper diagnoses the Nigerian valuation profession
as being in the second of the seven-stage process of movement towards investor-focused transition in
the UK.
Practical implications – The paper shows that the way forward for Nigerian evolution was seen to
require a strong research base on the part of the regulatory Institutions which should result in the
building of awareness, refinement of textbooks, empowerment of valuers and development of
valuation standards that meet modern requirements of investor sophistication.
Originality/value – This paper is the first to classify the development of investment technique
within academia and practice in the UK for the purpose of identifying how far behind the developing
markets are.
Keywords Investors, Investments, Property,Accuracy, Nigeria, United Kingdom
Paper type Research paper
Introduction
The property market has seen remarkable change in the past 40 years. In Europe and
the US for example, the property market has witnessed the advent of rapid rent
reviews, the growth of institutional investors, the management of investments on
portfolio basis (in which property constitutes just one of a variety of investment
media), and the advent of new property finance methods such as securitization and
unitization. These positive developments are a reflection of the growing refinement and
investment complexity of the valuer’s clients (the investors) relative to the level of
sophistication in the first half of the twentieth century. In response to the changing
expectations of invest or clients, financial an alysts such as accountan ts and
stockbrokers have progressively refined their financial techniques. Property
valuation and investment analysts in the UK have also begun to respond to the
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Investors’
requirements
43
Journal of Property Investment &
Finance
Vol. 25 No. 1, 2007
pp. 43-61
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780710720162
changing trends. It however appears, that in many developing countries of the
Commonwealth such as Nigeria, the response of property professionals (valuers) to this
process of change has been slow-moving. This has led to questions as to whether
valuers in such parts of the developing world are thinking men or creatures of habit.
Reflections of this nature have stimulated the present impetus to investigate into the
type of response shown by property investment valuers in the developing world to
changing investor requirements, with a present focus on Nigeria. These reflections
would help to ascertain how valuers in developing countries are progressing in the
path of evolution towards meeting the drift of investment expectations of the twenty
first century. There is a subtle, quiet but continuously increasing gap of investment
sophistication between European and US practice on one hand and that in countries
like Nigeria. The gap and its implications should provoke investigation because the
world is becoming a global village, and property investments are assuming
international dimensions. It follows that all professional practices should keep up with
universal trends of sophistication. The UK practice from which budding
Commonwealth valuation practices were derived, has itself been jolted out of the
slumber of valuation conservatism since the 1970s and has begun a constructive
evaluation of its valuation conduct in the midst of criticisms from outside financial
analysts. It appears that there has not yet been much by way of a resultant trickle
down effect from the UK to Nigeria.
The aim of the paper is therefore to work out the path of evolution that the Nigerian
valuation profession must follow in achieving investor-focused sophistication. In
achieving this aim, the general method is to draw up, from the literature, a model of the
evolutionary process of the parent profession – the UK valuation profession – in their
response to changing investor requirements over the past 40 years. The paper would
then evaluate where the Nigerian investment valuation profession (the academia,
practitioners and regulatory institutions) stands in such a path of evolution, as well as
the stumbling blocks to further progress. It should then be possible to point out the
refinements that are needed to budge Nigerian valuation evolution in the direction of
superior stages of investor friendly valuation practice in the twenty-first century. The
paper recognizes that the width of study necessary to chronicle the influences on the
development of the Investment Valuation technique and its assimilation into practice is
beyond the scope of one short paper. Nevertheless the authors believe that the issues
discussed are sufficient to achieve the aims of the paper. The limitation would not
necessarily detract from the contribution the paper seeks to make.
The paper is structured into nine sections, the first which is introductory. The
succeeding section examines the directions of the emerging expectations of investors
regarding income valuation. Having identified three directions in which current
investor requirements are progressing (requirements of increased accuracy, rationality
and risk analysis), the attempt in the next section is to draw up a pattern of the UK
evolutionary process of valuation sophistication in the past four decades.
Subsequently, the origins of the valuation profession in Nigeria are identified, upon
which three sections are devoted to a consideration of the present Nigerian position: the
response of Nigerian valuers to emerging investor requirements. The paper then
determines the level of progress the country has achieved in the UK pattern of
evolutionary transition and draws implications for the future. It closes with commen ts
by way of concluding remarks.
JPIF
25,1
44
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