BACKGROUND TO THE STUDY
It was in 1987, in the wake of some well
publicized research works by actuaries Hager and Lord that Drivers Jonas first
sponsored Investment Property Databank (IPD) to carry out detailed research
into valuation accuracy in the United Kingdom. The Royal Institution of
Chartered Surveyors (RICS), as the valuers’ professional body, later took over
the role of sponsor. In doing so, they were adopting one of the principal
recommendations of Sir Bryan Carlsberg’s Working Party on valuation practices.
In 1985, Udo-Akagha, one of the leading estate surveyors and valuers in
Nigeria, while writing a foreword to “Guidance Notes on Property Valuation”
noted that; “there ought to be no reason why two or more valuers valuing the
same interest in a property for the same purpose and at the same time should
not arrive at the same or similar results if they make use of the same data and
follow the same valuation approach”. In the same vein, in 1998, an editorial on
page 2 on “property valuation and the credibility problems” in The Estate
Surveyor and Valuer, the professional Journal of the Nigerian Institution of
Estate Surveyors and Valuers stated inter alia that “the valuation process has
been the focus of recent debate and controversy both within and outside the
profession as cases of two or more valuers giving different capital values with
wide margins of variation for the same property abound”.
Comments of this nature have led many to ask
whether estate surveyors and valuers are interpreters or creators of value.
From the above statements, it is evident that the twin problems of inaccuracy
and inconsistency (variance) in the valuation practice exist in Nigeria. Even
in developed countries such as Britain, Australia, Canada and USA, the valuers’
estimates, methods and processes have been increasingly criticized for over the
past thirty years as clients seek advice in increasingly sophisticated
investment markets (Baum and Macgregor, 1992). In the same vein, there has also
been a focus on the seeming inability of valuation estimates to accurately
represent/interpret market prices or serve as a security for bank loans.
Bretten and Wyatt (2002) observed that valuers do not operate with perfect
market knowledge while valuers in many instances follow clients’ instructions,
analyze available information, make judgments and respond to different pressures
from stakeholders when preparing a valuation in a market atmosphere of
heterogeneity. However, the study of valuation accuracy should be a continuing
one as is the case in the United Kingdom (UK) where the RICS of late teamed up
with the Investment Property Databank (IPD) to produce investigations into
valuation accuracy in Britain on a two (2) yearly basis.
The effort in this work will accordingly be
the study of valuation accuracy and consistency and the factors influencing
their occurrences, to cover a more up to date time period with a view to
validating/invalidating, expanding and updating the results in the pioneering
efforts of Ogunba (1997), Ogunba and Ajayi (1998) and Aluko (2000).
Accordingly, the present effort will be to deal with valuation of properties in
the Lagos metropolis which is regarded as the most active investment property
market city in Nigeria.