World organisations unite to improve investor confidence in real estate

At present, the way property assets – such as a housing development or shopping centre – are measured varies wildly from country to country. With so many different methods of measurement available, it makes it difficult for those looking to invest in these developments to compare like with like. This confusion can affect property values, lead to errors in financial reporting and, consequentially, undermine market confidence and economic stability

Today (1 May), some of the world’s leading property institutions, including the Royal Institution of Chartered Surveyors (RICS), will meet at the World Bank, Washington DC, to address this issue through the proposed implementation of a universal standard of property measurement. Such a standard would ensure global consistency, leading to fewer instances of fraud, a more transparent market, greater public trust and increased economic stability.

Convened by RICS, this initial meeting of the International Property Measurement Standards Coalition (IPMSC) is the first step to delivering this consistency which will provide:
• greater global financial stability
• more accurate and consistent financial reporting
• stronger investor confidence
• greater transparency of data
• reduced risk of fraud

An example of current inconsistency is the way in which floor space is calculated. For example, in Spain, floor areas have been measured 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 adjoined to the property itself.

The IPMSC aim is to resolve disparities by developing and implementing International Property Measurement Standards, a set of standards for measurement that are principles based and internationally applicable, to be adopted by all nations across the globe.

Ken Creighton, RICS Director of Professional Standards, said: "This is a groundbreaking initiative which has 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."
Steve Williams FRICS, Executive MD, Real Capital Analytics, New York, mentioned: “The accurate recording of land, building and floor area measurements is fundamental to market transparency. Transparency in turn is a catalyst to the global capital flows that underpin the provision of adequate shelter, food and clothing to the world’s growing urban populations. With the exception of language, it would not be an exaggeration to characterise global measurement protocols as the most urgent outstanding issue in the pursuit of global market transparency and performance comparability.”
Jennifer Sharpe, MRICS, member of the board of RICS Cyprus, said: “The proposed implementation of a universal standard of property measurement will enable all property professionals to speak the same language while at the same time providing stronger investor confidence and transparency. Language barriers and local practises will be eliminated as well as misrepresentations of space, which may give rise to misleading values. Moreover, with regards to Cyprus, which is seeking to attract foreign direct investment it will enable prospective investors to compare like with like and provide a more comprehensive tool for performance analysis.”