Claims trends against surveyors and valuers
With a rising property market over the last 10 years in Hong Kong, valuation surveyors have experienced relatively few claims. Whether this will change depends upon the future state of the economy, and the property market in particular.
At present, Hong Kong is one of the world’s most expensive cities in which to live. It also has the highest disparity between the average house price and the average income, at nearly one-17th of the home price. In 2012, the IMF was predicting an abrupt correction and a bursting of the Hong Kong property “bubble”. Remarkably, however, the price of Hong Kong property has continued to increase. Despite numerous cooling measures introduced by the government, such as mortgage-tightening and increased stamp duties, Hong Kong’s residential property prices have jumped 18.7% in the past year.
Nonetheless, with about 15,000 housing units available for sale or rent in the market, some analysts are predicting a 5 – 10% drop in new property prices by the end of this year, signifying an end to the decade-long property boom. This “correction” in itself is unlikely to trigger a swathe of claims, particularly with the economy still predicted to grow.
Even if Hong Kong does see a sudden drop in property prices, there are various other factors which should act to reduce the prospects of claims against valuation surveyors in Hong Kong.
Firstly, the Hong Kong Monetary Authority has taken a pro-active stance in capping the maximum value loan on a property. This, in turn, reduces the prospect of the property suffering such a severe drop that the lender suffers a loss and brings a claim. It is unlikely that Hong Kong will see the raft of lender claims that have plagued surveyors in the UK.
Secondly, deciding the potential market value of an apartment in Hong Kong where numerous other identical properties have been sold over the previous period is a far more certain (and less risky) exercise than predicting the value of a one-off house, where nothing comparable may have been sold in the area in recent years.
Thirdly, the Hong Kong Institute of Surveyors (“HKIS”), equivalent to the Royal Institution of Chartered Surveyors in the UK, is seeking to ensure that Hong Kong valuation surveyors continue to meet the required levels of expertise. The HKIS published the Valuation Standards (latest edition in 2012) to bring Hong Kong in line with international standards. In addition, to supplement the Valuation Standards, the Hong Kong Stock Exchange issued a formal Guidance Letter in September 2013, and further refined it in January 2015, to provide guidance on the preparation of property valuation reports and market reports in relation to listing documents.
Whilst it could be said that new standards give rise to a higher benchmark against which to judge competency, in our experience, the “prevention is better than cure” approach adopted by the HKIS should lead to a reduced number of claims.
We would consider therefore that the outlook for valuation surveyors in Hong Kong is positive for now. The exposure areas are likely to be in other activities carried out by the profession, such as in the FM and Property Management areas.