Investigating the UAE Residential Valuation System: A Framework for Analysis

The development of the United Arab Emirates (UAE) into a regional trade, tourism, finance and logistics hub has transformed its real estate markets. However, development has been accompanied by significant real estate prices variance. UAE residential market values (MV) are exposed to fluctuations in capital flows and migration which, in turn, are affected by geopolitical uncertainty, oil price volatility and global investment market sentiment. Internally, UAE residential property markets are fragmented by a complex interplay between tenure, building and evolving location characteristics. In short, the UAE Residential Valuation System (UAE-RVS) confronts multiple challenges to collect, filter and analyze relevant information in complex and dynamic spatial and capital markets. A robust (RVS) can mitigate the risk of unhelpful volatility, speculative excess or investment mistakes. The research outlines the institutional, ontological, dynamic and epistemological issues at play.


I. INTRODUCTION
ESIDENTIAL valuation systems ("RVS") facilitate property market functioning and include system boundaries, elements (stakeholders, institutions), processes (valuation practice and standards), outputs (registration, valuations, market reports) and feedback mechanisms (prices). The RVS records ownership, documents transactions, transfers title, evaluates risks and estimates various values. The RVS strengthens market transparency and facilitates appropriate private and public investment. It strengthens conurbation resilience to multiple pressures (strategic, hydrological, technological, demographic, financial and climatic). The ultimate RVS output is trust, substantiated by registration clarity (property title, tenure, encumbrances, and boundaries), jurisdiction-dependent standards and credible valuations [1]. Local valuation practices engage with International Valuation Standards (IVS) produced by the International Valuation Standards Council (IVSC) but cultural and operational issues mean that valuations can diverge widely. In the UK, Market value ("MV") is distinct from investment value ("IV") or mortgage valuation for banks [2] but all are opinions whose reliability is conditioned by the institutional setting, the evidence supporting them [3], [4]. To benchmark a valuation system will involve considerations of its constituents, processes and the reliability of its outputs.

Factors affecting valuation
 Institutional capacity  Ontological complexity  Market dynamics  Information asymmetry

A. Institutions
Cities are a "complex jumble of independent but interdependent activities" [5]. The RVS institutions are macro (legal framework) or micro (regulatory bodies, real estate companies, banks) but extend to processes, ethics and valuation standards [6]. Issues of formal and informal organizational and network architecture (structure) [7]; practices and cognitive social capital (values, beliefs, attitudes, behavior and norms) are involved [8]. Social capital refers to trust, solidarity and reciprocity that valuation stakeholders may or may not share [9]. Institutions within the RVS should securely keep detailed records of ownership, charges (easements) and transactions. It should measure areas and boundaries and note conditions. In terms of practice, the RVS should refer to properly sourced standards. Ideally institutions and valuers should be independent, avoid conflicts of interest and objectively assess subject properties.

B. Inherent Ontological Uncertainty
Ontology refers to the physical constitution of fragmented markets where consumers attempt to process information and reconcile multiple geographical and building quality attributes. Any RVS confronts complex ontologies in terms of spatial sub-markets and dwelling characteristics. Each conurbation in the Emirates is distinct as are intra-urban locales. Locales appeal is influenced by multiple positive and negative factors (status, socio-economic profile, climate risk, waste dumps, access to jobs and facilities, air quality etc.). Dwellings are also unique in terms of (site, design, structure, energyefficiency, area, views and cultural suitability to buyer segments). To determine MV, the RVS needs to evaluate locales and building/dwelling quality and assess its monetized

Investigating the UAE Residential Valuation
System: a Framework for Analysis Simon Huston, Ebraheim Lahbash and Ali Parsa R appeal (demand) by various active market players. The task is rendered more challenging with unusual properties or when special purchasers are active.

C. Dynamics
Property markets, at different stages of maturity, evolve endogenously (internally) subject to infrastructure disjunctures. In fast-changing cities like Dubai new malls sprout or roads are built quickly.
Planning permission or infrastructure announcements alter the risk landscape and signal development opportunities or danger. Markets like Dubai are also exposed to exogenous (externally) disturbances.
Exogenous influences include unforeseen financial, macro-economic or geo-political events (e.g. the Syrian war) and natural or man-made disasters (e.g. Tsunamis or oil spills). The RVS should include mechanisms to monitor and distribute information about internal and external market conditions, liquidity fluctuations or sudden changes in capital market sentiment that can alter MV. In the aftermath of shocks, valuations confront empirical data constraints or inconsistencies which can be compensated, but only up to a degree, by common sense and professional judgment. In short, markets are dynamic and can become volatile.

D. Information
Knowing the dynamic context, RVS players need to analyze the forces of change shaping values [10]. Information restrictions undermine valuation reliability. In any event, the nature and source of information relied on should clearly be stated and attention drawn to any limitations. Ironically, when markets become illiquid and demand for quality RVS intelligence is acute, transaction data dries up, undermining empirical valuation support.
Hence, RVS data quality (relevant, valid and timely) is critical. RVS assessment needs to vet the environmental scanning (ES), decision support systems (DSS) and data integration architecture (human and IT). Market players seek data quality assurance, indicted by the dissemination of robust empirical property data on underlying contractual legalities, spatial and building characteristics and market dynamics.

III. INVESTIGATING THE UAE RVS
Having determined the main RVS constituents Fig.2 illustrates and Table 1 details the four phases for a systematic investigation of the UAE RVS. The first phase is a conceptual one and includes a systematic review of relevant academic and professional literature on real estate and its valuation. The conceptual phase concludes with a RVS framework and detailed research methodology.
The Exploratory Phase involves, first, documenting the current institutions, standards and valuation practices in the Emirates. A robust assessment of UAE residential valuation system (UAE-RVS) begins with a market determination to establish the level of market maturity and the key market players. Once the market landscape is clear, the next step is to estimate the extent of any valuation inaccuracy [12] [13]. In practice, this will involve hedonic modeling to estimate the dispersion of system list prices from estimated ones. Later, any links between degree of inaccuracy and system characteristics can be investigated institutional capacity.
Institutional analysis (IA) first documents the entities involved in the registration and valuation process (market players) in different Emirates. IA then collects evidence on valuation standards and valuation protocols in use. Practice observation and player discussions should establish whether the UAE-RVS collects useful ontological and dynamic intelligence. The research looks for indicators of good practices such as environmental scanning (ES).
In terms of determining RVS intelligence capability to render ontological complexity, property pathology and gauge market dynamics as illustrated by Fig. 1. ES involves collecting, registering, categorizing and synthesizing [ibid. 10] diverse literary and oral sources of RVS institutional capacity and intelligence. The research identifies relevant operational indicators of praxis such as, for example, the application of spatial decision technologies such as GIS mapping for property registration, taxation, utilities charging and boundary dispute resolution. A modern RVS should harness remote technologies to conduct desktop research for registration, due diligence, mass appraisals or locales quality criteria for planning. Remote information should also be supported by systematic site visits by qualified professionals (surveyors) to measure subject properties, ascertain condition and record key features or encumbrances. For MV determination, grounded evidence supports the selection of appropriate comparable properties (similar recently sold or leased premises). Practical indicators of RVS institutional capacity could involve:  Documenting the technologies utilized  Recording surveyor qualifications  Observing or querying practice Indicators of RVS intelligence capabilities re market dynamics could include use of advanced modeling techniques to inform cyclical determination such as univariate (ARIMA) or multivariate econometric modeling [11].  This paper first noted the UAEs rapid development but exposure to geo-political turbulence, migratory pressures and capital fluctuations. Property plays a significant economic role in the Emirates economy but the market needs proper oversight and stabilization. A robust residential valuation system (RVS) facilitates resource allocation, stabilizes the market and helps attract and retain overseas investment funding. It guides plans for urban resilience and balances production impulses against community dwelling. A finetuned RVS could help to tame speculative excess, wasteful or low-quality construction and aesthetically questionable architecture. Preliminary findings of the research suggest that cultural and operational issues likely complicate the engagement of local valuation practices with international standards (IVS). Practitioners voiced concerns about RVS institutional capabilities. In some quarters, valuation standards were not salient. Some stakeholders mistrust the system and revert to ad hoc practices to get reliable market data. Further investigation and better quality data is required to make a measured RVS assessment. Fig. 2 illustrates a structured research pathway for investigation, spanning market analysis, hedonic modeling and institutional evaluation (players, architecture, values and collaboration) with an assessment of intelligence (knowledge) capability (technologies, professionalism and modeling). Institutional capacity involves macro and micro considerations with structural and cognitive aspects, valuation standards and decision support technologies. A complete answer to the UAE-RVS question involves nine objectives (see Table 1) and requires answers to corresponding subsidiary research questions. The nine project milestones mark progress towards a complete answer for the UAE-RVS question, beginning with the review of relevant academic literature and professional valuation standards. The Exploratory Phase research taps secondary sources and transaction data, seeking to determine extent of valuation accuracy in different markets. The operational phase observes and documents UAE valuation standards, organizational structures, collaboration and spatial technologies (mass appraisals, DSS, GIS). We identify key RVS stakeholders and assess valuation standards salience and institutional trust via online survey or interview. The survey instruments collect details on valuation procedures, professional praxis, ICT networks and statistical forecasting modeling capability. With extent of valuation inaccuracy clear, we proceed to investigate the link between valuation inaccuracy and system characteristics. The research will corroborate initial survey findings via stakeholder focus groups.