INCORPORATING SUSTAINABILITY INTO VALUATION PRACTICE AND STANDARDS IN SINGAPORE

Abstract

The purpose of this paper is to recognize the requirement for valuers to be up-to-date and the need to develop a new green valuation practice and standard in a constantly evolving market, like Singapore. The author highlights the rationale behind greening the valuation industry, and proposes methodologies and techniques valuers may undertake, with the help of literature studies.

As the property market, specifically the property investment market, is experiencing a shift towards sustainability, valuers come into play for two main reasons – the ability to aid in the government’s green agenda and the need for accurate price estimates of green properties. The published literature also provides justification and aid in the understanding of integrating sustainability into the actual valuations of green properties in Singapore. This includes the data collection, site inspections, application of approach and final preparation of reports.

The integration of sustainability into the direct comparison method is only possible if the current market values sustainability, and there is no empirical evidence to prove this is so yet. Thus the income method is the most appropriate method to incorporate sustainability. It is forward-looking and does not require sustainability to be reflected in present day transactions. Nonetheless, integration of sustainability into the direct comparison method is explored in two scenarios - availability and unavailability of green comparable properties. Subsequently, sustainability characteristics are identified and analyzed as to how they have an impact on input parameters, such as the capitalization rate and operating expenses, for the income method.