There is a strategic shift in the way the market now views property valuation experts and the whole premise of valuations. During the boom, when everyone was buying and everyone was selling, valuation experts were indispensable but had a more sedentary role; their advice was just a part of the loan approval process.

The global financial crisis brought about a sea change in the way corporate governance and transparency measures are viewed, and it thrust the role of valuation experts to the forefront.

With tightening mortgages, the role that valuers played in the overall purchase process has become indispensable.

The valuation report, which has always been a must in the check-list by banks to process property loans, is now being given the deserved thorough scan and the recommendation appreciated for its face value. Valuation reports and the role of valuers are appreciated by clients too.

The elements of valuation find their resonance in the basics of good business practices. What is the most prudent way to utilise resources – that is the key question every business leader asks.

Valuation takes this question from the context of property. What is the return on capital in renting versus buying? If the funds used in the purchase of a building can be better used within the business, is it not better to rent as the overall returns to the business would be higher, all other matters remaining equal?

These considerations are crucial when it comes to the property market and gain particular relevance to the Dubai real estate sector, which has recorded an increase in demand and price per sq ft across key projects such as Downtown Dubai, Dubai Marina and International City, among others. Valuations around the world usually follow the same principles but generally the different legal structures impact valuations the most.

There is a movement to standardise valuations in accordance with internationally agreed standards but this is yet to be ratified.

What, in essence, is a valuation? Typically it is a document that advises the reasonable price a purchaser would pay for an interest in property. Generally this is the average price a selection of purchasers would pay. An offer does not constitute substantive evidence for a valuation; reliable evidence can only be based on completed transactions.

However, there is a distinct difference between value and worth; for example my car is worth Dh100,000 to me but its value in the open market may only be Dh50,000. Most people think their assets are worth more than the value given. This is human nature.

Valuations are mostly carried out using the comparable method. For example, the house next door sold for Dh1,000,000 so the property being valued, if identical, should also be valued at the same rate. The skill of a valuer is to make the correct adjustments as no two properties are identical.

One of the challenges faced in the UAE is the lack of transactional data; valuers generally rely on their own internal database whereas in more developed markets there are centralised databases, which help to ensure accuracy.

As professionals, valuers not only are responsible to their clients but also to the larger economy including the third parties such as banks and financial institutions which make an informed decision based on the recommendations of the valuation expert.

Valuation has a set code of ethics – and clients must insist on valuation reports that respect these guidelines, such as those set by the Royal Institute of Chartered Surveyors.

Valuation has indeed emerged from the shadows, and it is for clients to understand and appreciate how this specialised service can be leveraged for their benefit; a valuer is not an obstacle – his or her service serves to facilitate long-term and attractive returns.

The property market, for all current trends, is heading north; the key is to make sure that the exciting buzz and dynamism does not blind bankers and customers, and that valuation is regarded the seriousness of purpose it deserves.

- The author is Director of Valuations and Research, Middle East, Hamptons International. The views express are his own