For Malaysian property valuer Sunny YL Soo of Knight Frank, Cambodians need to improve their knowledge of how properties can be valued and work on shifting the approach from looking at a cost angle to a property interest angle, which entails recognising and quantifying the potential of a property.
Engaged by banks and other firms to assign value to properties, Sunny finds himself in a situation in Cambodia where his primary role is educating others.“We are here to grow with Cambodia and to educate the local real estate advisory industry, not only in the modern methods of valuation and reporting standards, but distinguishing what’s appropriate and beneficial in the changing circumstances of the growing economic environment,” he said. To illustrate the difference between a cost approach and an income approach of valuation, Soo gave the example of a hotel valuation:
“What if the hotel is outperforming the standard of the market? What if the hotel is tied down by a long and unfavorable lease? What if the hotel is regarded as a heritage building that forbids any redevelopment potential? Will a cost approach conveys its true value?” Soo said.
Eighty percent of valuations that take place in Cambodia are done by the cost approach, according to Soo, whereas during his five years in China, he has encountered only about five percent of valuations conducted using this method.
Soo worked as a valuer in Beijing starting in early 2006 during a freewheeling period when skilled foreign investors were in abundance and serious about income potential as a determining factor in valuation.
“China was moving so fast, even today, and you’re faced with so many people from various international backgrounds, that the reporting standard have to meet international standards,” he said.
“You’re dealing with competent and very well-prepared investment bankers. China is a place where you can really get brushed up your valuation skills and negotiation skill too, because of the exposure these professional people has. The opportunity to meet them allows me to learn from how they think,” Soo said.
Since his arrival to Cambodia in November 2010, Soo has been working to improve the local people about appropriate valuation practices. He has been involved in training the valuation professionals of the Cambodia Real Estate and Valuation Association (CVEA) and providing advisory to local businesses about the importance of accounting and valuation.
“Property valuation in Cambodia remains in its infancy, and the same goes for many of the regulations the government has recently developed, like the issue of property taxes,” he said.
“The transparency of how property tax is calculated and carried out is very important. But the fact remains even some local professionals have little idea about how it will be carried out, including myself” Soo said.
Because of the lack of reporting standards, local valuers often default to a Malaysian reporting standard.
“Depending on who we are doing business with, the reporting standard is sometimes a Malaysian reporting standard. Most often we can actually improve the reporting standard and provide the market with more accurate information, sound advice and allow the user the flexibility of crafting their decision or policy implementation. There is always room for improvement,” Soo said.
As for professional ethics, Soo says: “Professional fees you can always discuss with me, but leave the market valueto me”. He said a real professional knows his limitations, and what he can and cannot do.