As investors scour the world for suitable investments in which to park their money, the real estate professionals who advise them are often working between markets in which different rules and standards apply and in which there are differing degrees of transparency in property transactions. This fact could be construed as a bit of a challenge, if not a problem, as far as those who are trying to apply consistent professional standards in the real estate business are concerned.

Effective standards for compliance
But of course, every problem is also an opportunity. Royal Institution of Chartered Surveyors’ (RICS) CEO Louis Armstrong says, “It is not a problem in the sense that people are getting away with not being regulated. The problem is that you have got to demonstrate that standards are being effectively applied. The way to do this is through the fi rms, by making sure that their compliance regimes are in place.” Armstrong explains that RICS is working particularly with fi rms active on the valuation and investment side of the business as well as those whose emphasis is construction and project management. Nowadays too, more attention is focused on professional ethics and accountability. “We are fortunate in having had Sarbanes Oxley and a general toughening up around the world.”

Armstrong also points out that one of the most effective ways in which real estate advisors can apply standards is by employing the right people in the fi rst place and by ensuring that they are appropriately trained. The need for professional indemnity insurance also pushes in the same direction because of the stipulations that it carries. The pressures vary in different parts of the world. However, Armstrong adds, “We are working with the grain of wider regulatory authorities and we are able to build a picture of where the risks are highest of noncompliance and try to provide a system that encourages compliance.”

Regulatory regimes key for valuation
Because there can be stark differences between markets there is no one-size-fi ts-all solution, says Armstrong. “We are working with firms and working on regulatory regimes and adapting them to different market requirements, whether that is in Milan or Lagos,” he says. Armstrong emphasizes that the regime has to be appropriate to local conditions. “It is vital to make sure at the same time that we don’t kill the goose that laid the golden egg.” Valuation is the most important of the key issues, according to Armstrong and he says that one way RICS can convince governments that their markets should be regulated is to point out that a bad reputation can impact on inward investment. “If they don’t have RICS or something similar, there will not be enough confidence among investors – in other words if there are too many spivs and sharks, investment confidence falls and investors will go somewhere else.” RICS is working in other ways to improve the international real estate markets as well as working with anti-corruption organization Transparency International, and also working with disaster management organizations to determine why it is that money raised following disasters does not fully translate into worthwhile projects. “There is a lot of corruption and the biggest challenge is how to progressively persuade governments that, in the long-term, a country’s prosperity is better served if it is eliminated.”

Reforms help emerging markets
In some cases this persuasion is a case of pushing on an open door. “Vietnam, a country of about 84 million people, is about to explode onto the investment market after a false start in the 90s. The country has a reforming premier who invited RICS to establish internationally recognized valuation standards there,” Armstrong explains. Vietnam’s emergence and its need to set up a property market from scratch has parallels elsewhere, such as the European Union- and World Trade Organization-accession countries. “RICS has a unique role here. No one else has the global reach to be able to do that, to give them the key rules for attracting investment, how to approach valuation and how to train their professionals.” Some environments are more complex. “India is a very difficult one to work in. It doesn’t belong to the International Valuation Standards Committee, it is very bureaucratic and there is a different approach in each different state.

• RICS has grown and spread over the last couple of years. We now have some 130,000 members in 120 countries. We operate through five world regions and have 41 national associations, including 22 in Europe. The increasing globalization of business and investment has accelerated our international growth, and our leading role in developing and promoting international professional standards has been recognized by governments, NGOs and businesses worldwide. The RICS qualification is seen as an international professional passport.
  
  
• RICS responds to new developments in a number of ways. We keep the APC competency requirements under constant review. Following an exercise last year we have just launched a revised APC. It contains a number of innovations, for example, a pathway in Property Finance and Investment, to reflect the increasing demand for new professionals with leading edge skills in this area. Additional emphasis has been placed on, for example, sustainability and environmental issues, health and safety and business skills.
  
  
• RICS has 17 market facing Faculties, whose job it is to spot emerging market needs and develop the leading edge knowledge and best practice to equip our members to take full advantage of the opportunities, and avoid the pitfalls.
  
  
• We have seen an unprecedented weight of capital looking for a home in real estate in recent years, with cross border flows leading the way. I think this is set to continue, as vast new markets come to the fore, for example China and India. The spread of REITs to around 20 countries (including, at long last, the UK at the beginning of this year) is opening up property investment to ordinary private individuals as well as institutions, and I think there is far more to come. Investors are looking for the reliable professional advice that RICS members provide, as they seek the reassurance that they can expect the same standards to be applied wherever in the world they are considering. They want high ethical standards, in the wake of scandals such as Enron and Worldcom, and they want to be able to compare on a like for like basis, for example through the application of international valuation and measurement standards.
  
  
• Asia holds huge potential for the real estate industry. We have doubled our membership over the last year in mainland China, for example. At the end of 2006 we signed an agreement with the Vietnamese Ministry of Finance – Vietnam is the second-fastest growing Asian economy – to train their leading valuers through the world-renowned College of Estate Management in Reading, UK, and introduce internationally acceptable valuation standards. We are also looking hard at India and will be developing our membership there, while there is more work to be done in the Americas and Europe, including eastern Europe. In terms of sectors, investment, environment and the strategic management of commercial property would be the areas that I would highlight – not new to us but offering great opportunities for expansion.

International recognition increases membership
Perhaps surprisingly RICS has an increasing role in arguably the most developed economy in the world, the US. “America is interesting in terms of valuation. It is bringing its international reporting standards in line with the Red Book and international valuation standards. Progressively there is convergence. Two things have brought this on: Australian and other money heading into the US and US dollars heading elsewhere. You still have to obtain a state license to practice there but a lot of firms are also employing RICS-qualified people.”

The international recognition of what started out as a UK-focused professional body, is spreading. Armstrong says that membership is up worldwide and what’s more the demand from people wishing to be members is huge. RICS membership is currently growing faster outside than inside Europe. Numbers increased by 50% in China over a year, albeit from a low base, but the building blocks are in place to train and assess in even greater numbers.

This is a good position to be in but Armstrong is emphatic that no concessions are being made to boost the membership. “It is still difficult to become a member – we’re not dropping our standards,” he says. “We are extremely concerned about making sure that we don’t devalue the currency. It is absolutely vital to provide a seamless quality of advice from country to country – you have to be able to compare apples with apples.”