Valuation Problems in Developing Countries: A New Perspective

Abstract

Valuation problems, such as valuation inaccuracies/variations, client influence, and the use of heuristics, are common problems in property valuation practice globally. These problems have generated debate in recent times under the rubric of “behavioural issues in valuation”. This paper examines valuation problems in developing countries, as well as the current efforts that are undertaken to address these problems, with a view of determining the best approach to explain and/or address them. This stems from the persistence of valuation problems despite efforts undertaken to improve the practice of valuation. The study involves a survey of registered and practising valuers in Kenya. Respondents were asked to indicate valuation problems in practice, adopted strategies, and recommendations to address the said problems. It emerged from the study that valuation problems not only result from valuer misconduct but also market-related problems/the valuation environment in developing countries. The study further found that efforts to address these problems are mainly focused on improving valuer conduct while neglecting market-related problems (problems related to the nature of the valuation environment in developing countries). Based on these findings, the study concludes that valuation problems in practice are better understood in the context of both categories, i.e., valuer conduct and market-related problems, and recommends a holistic approach to address these problems by categorising them appropriately.

Client influence in property valuation: a scoping literature review

“…Furthermore, as Adams et al (2021) argue using the Enron-Andersen scandal, client influence has a devastating impact on both the clients and the professionals that succumb. Importantly, there is no evidence that points to client influence as being completely eliminated (see API, 2018;Cheloti and Mooya, 2021).…”

An assessment of valuation education and training in Kenya in comparison with practice

“…(Awuah et al. , 2016; Cheloti and Mooya, 2021; Mutema, 2016; Mwangi, 2007). Further, Mutema (2016) established gaps in the real estate curricula as one of the problems contributing to valuation inaccuracies in developing countries.…”

“…This is mainly because of the nature of the property market in developing countries characterised by immature property markets, poor information, poor land information management systems, corruption, etc. (Awuah et al, 2016;Cheloti and Mooya, 2021;Mutema, 2016;Mwangi, 2007). Further, Mutema (2016) established gaps in the real estate curricula as one of the problems contributing to valuation inaccuracies in developing countries.…”

Designing a Valuation System for Property Tax: The Case of Zanzibar, Tanzania

“…About 75 percent of African 51 countries with property taxes have adopted the discrete individual value-based property tax system. However, it is inefficient in the following aspects: number of valuers, valuation capacity and moral capability of valuers, and revaluations or unacceptably long intervals between revaluations [16][17][18][19][20]. Cheloti and Mooya argued that the valuation system in African countries is flawed because it lacks quality property market data [16].…”

“…Therefore, it is crucial for governments to increase the number of valuers and improve their valuation and moral capacities. Moreover, as suggested by Cheloti and Mooya [16], governments should build a database for property market transactions to overcome prob-lems of incomplete and unreliable property market information. However, the challenge is that it takes time for developing countries to collect market transaction data and build a better valuation system.…”