Valuing Sustainability in Australia: Implications for the Valuation Profession

Abstract

There is an urgent need for sustainability to be incorporated into the valuation process in order to ascertain and accurately reflect the relationship between sustainability and market value, and increase large-scale sustainability investment in property. This predicament has been recognised and increasing emphasis from industry, valuation bodies and academia is being placed on valuers to incorporate sustainability into the valuation process. However, it is questionable whether valuers are adequately equipped with the knowledge and skills to incorporate sustainability into valuation practice.This research investigates valuers’ incorporation of sustainability in valuation practice and their knowledge of sustainability. It is anticipated that with the increasing need to report on sustainability, valuers’ knowledge levels will need to develop. Warren-Myers (2010) found valuers at the time (in 2008) were inadequately skilled to incorporate sustainability into value assessments. The fundamental process of valuation practice is a complex relationship between art and science, and the building of strategic knowledge to develop the heuristics and judgement required in valuation takes time. This research endeavours to track valuers’ sustainability knowledge development in Australia over time and will, consequently, lead valuers’ to be more th orough in their comparative analysis and assessment of sustainability factors in property. The identification of a clearer relationship between sustainability and market value should result. The research method utilises a mixed-mode approach, using surveys built of open and closed questions that investigate valuers’ perceptions of their own knowledge, their actions in practice, and tests their knowledge of sustainability. This paper presents the findings from the first phase of this research project.The research found valuers in Australia are reporting on sustainability in valuation reports, and providing advice to clients on sustainability. However, it has also found that valuers are reliant on sustainability assessment tools, about which they have only limited knowledge. Compared to previous research where valuers were reluctant to address sustainability in valuation practice, this research has found a demonstrable change in the profession. However, there is cause for concern considering the level of knowledge and understanding valuers are displaying. Long-term, their lack of knowledge may cause more issues with the misapplication or judgements made in valuation regarding the relationship between sustainability and value. This research stresses the implications for the profession, should valuers be reporting and advising on concepts of which they have limited understanding, and should they be adapting or making judgements about sustainability in the valuation process, which ultimately affects the reporting of market value. This research highlights the urgent need for professional development in the property industry and, in particular, for valuers to develop their knowledge, understanding, assessment capabilities and judgement of sustainability in valuation practice.