International Valuation Standards in the South African Context

Last month, in view of his extensive International Valuation Standards Committee background representing the Institute, Robin Martin was asked to provide a quotation for use in its developing IVSC campaign to highlight the growing importance of IVS around the world, through social media and presentations given by IVSC representatives.  As a result of this IVSC approach, the Institute has since requested Robin Marten to provide a paper to support the further extension of the use of IVS within the South African context.

From the desk of Robin Marten, SAIV Past President and IVSC Elected Management Board Member:

For me, the core of IVS has always been the IVS definition of Market Value, together with the conceptual framework of such definition.

In 1993 the IVS Market Value definition was established at the Melbourne Meeting of the IVSC, the individual components of such definition being amplified by reference to the ensuing conceptual framework, with the comment that “Each element of the definition has its own conceptual framework.”

In IVS 2011 this had changed to “The definition of market value shall be applied in accordance with the following conceptual framework.

IVS 2017 has made such application mandatory, with the words “The definition of Market Value must be applied in accordance with the following conceptual framework.”

It should therefore be incumbent on each and every valuer in South Africa and round the world  to base Market Value assessments utilising the IVS 2017 Market Value definition, with its now mandatory conceptual framework application.

To bring SAIV Members and the wider South African valuer community up to date in this regard, the IVS 2017 Section 30 Market Value definition  and mandatory conceptual framework application is set out below :-

“30. IVS-Defined Basis of Value – Market Value

30.1 Market Value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

30.2 The definition of Market Value shall be applied in accordance with the following conceptual framework:

(a) “The estimated amount” refers to a price expressed in terms of money payable for the asset in an arm’s length transaction. Market Value is the most probable price reasonably obtainable in the market on the valuation date in keeping with the market value definition. It is the best price reasonably obtainable by the seller and the most advantageous price reasonably obtainable by the buyer. The estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of value available only to a specific owner or purchaser.

(b) “An asset or liability should exchange” refers to the fact that the value of an asset is an estimated amount rather than a predetermined amount or actual sale price. It is the price in a transaction that meets all the elements of the Market Value definition at the valuation date;

(c) “On the valuation date” requires that the valuation is time-specific as of a given date. Because markets and market conditions may change, the estimated value may be incorrect or inappropriate at another time. The valuation amount will reflect the actual market state and circumstances as at the valuation date, not those at any other date;

(d) “Between a willing buyer” refers to one who is motivated, but not compelled to buy. This buyer is neither over eager nor determined to buy at any price. This buyer is also one who purchases in accordance with the realities of the current market and with current market expectations, rather than in relation to an imaginary or hypothetical market that cannot be demonstrated or anticipated to exist. The assumed buyer would not pay a higher price than the market requires. The present owner is included amongst those who constitute “the market”;

(e) “And a willing seller” is neither an over eager not a forced seller prepared to sell at any price, nor one prepared to hold out for a price not considered reasonable in the current market. The willing seller is motivated to sell the asset at market terms for the best price attainable in the open market after proper marketing, whatever that price may be. The factual circumstances of the actual owner are not a part of this consideration because the willing seller is a hypothetical owner;

(f) “In an arm’s length transaction” is one between parties who do not have a particular or special relationship, eg parent and subsidiary companies or landlord and tenant, that may make the price level uncharacteristic of the market or inflated. The Market Value transaction is presumed to be between unrelated parties, each acting independently;

(g) “After proper marketing” means that the asset has been exposed to the market in the most appropriate manner to effect its disposal at the best price reasonably obtainable in accordance with the Market Value definition. The method of sale is deemed to be that most appropriate to obtain the best price in the market to which the seller has access. The length of exposure time is not a fixed period but will vary according to the type of asset and market conditions. The only criterion is that there must have been sufficient time to allow the asset to be brought to the attention of an adequate number of market participants. The exposure period occurs prior to the valuation date;

(h) “Where the parties had each acted knowledgeably, prudently” presumes that both the willing buyer and the willing seller are reasonably informed about the nature and characteristics of the asset, its actual and potential uses and the state of the market as of the valuation date. Each is further presumed to use that knowledge prudently to seek the price that is most favourable for their respective positions in the transaction. Prudence is assessed by referring to the state of the market at the valuation date, not with benefit of hindsight at some later date. For example, it is not necessarily imprudent for a seller to sell assets in a market with falling prices at a price that is lower than previous market levels. In such cases, as is true for other exchanges in markets with changing prices, the prudent buyer or seller will act in accordance with the best market information available at the time;

(i) “And without compulsion” establishes that each party is motivated to undertake the transaction, but neither is forced or unduly coerced to complete it.

30.3 The concept of Market Value presumes a price negotiated in an open and competitive market where the participants are acting freely. The market for an asset could be an international market or a local market. The market could consist of numerous buyers and sellers, or could be one characterised by a limited number of market participants. The market in which the asset is presumed exposed for sale is one in which the asset notionally being exchanged is normally exchanged.

30.4 The Market Value of an asset will reflect it highest and best use (see paras 140.1 – 140.5). The highest and best use is the use of an asset that maximises its potential and that is possible, legally permissible and financially feasible. The highest and best use may be for a continuation of an asset’s existing use or for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid.

30.5 The nature and source of the valuation inputs must be consistent with the basis of value, which in turn must have regard to the valuation purpose. For example, various approaches and methods may be used to arrive at an opinion of value provided that they use market derived data. The market approach will, by definition, use market-derived inputs. To indicate Market Value, the income approach should be applied, using inputs and assumptions that would be accepted by participants. To indicate Market Value using the cost approach, the cost of and asset of equal utility and the appropriation depreciation should be determined by analysis of market-based costs and depreciation.

30.6 The data available and the circumstances relating to the market for the asset being valued must determine which valuation method of methods are most relevant and appropriate. If based on appropriately analysed market-derived data, each approach or method used should provide an indication of Market Value.

30.7 Market Value does not reflect attributes of an asset that are of value to a specific owner or purchaser that are not available to other buyers in the market. Such advantages may relate to the physical, geographic, economic or legal characteristics of an asset. Market Value requires the disregard of any such element of value because, at any given date, it is only assumed that there is a willing buyer, not a particular willing buyer.”

To illustrate the extent to which the IVSC valuation principles within IVS 2017 are set down, such definition forms part of IVS 104 Bases of Value, which includes the following IVS Defined Bases of Value :-

Contents Paragraphs
Introduction 10
IVS-Defined Basis of Value – Market Value 20
IVS-Defined Basis of Value – Market Rent 30
IVS-Defined Basis of Value – Equitable Value 40
IVS-Defined Basis of Value – Investment Value/Worth 50
IVS-Defined Basis of Value – Synergistic Value 60
IVS-Defined Basis of Value – Liquidation Value 70

These extracts from International Valuation Standards 2017 are reproduced with kind permission of the International Valuation Standards Council (IVSC) that owns the copyright. No responsibility is accepted by the IVSC for the accuracy of the information as republished. The approved text of the International Valuation Standards 2017 is that published by the IVSC in the English language and copies may be obtained via the website

I would firstly like to deal with the background to the introduction of IVS into South Africa, coupled with the major improvement in property valuation and allied real estate educational standards that have taken place here since I arrived in South Africa from Britain more than 50 years ago, through the introduction of South African University Degrees and Post Graduate Degrees in Property Studies and Real Estate, for example..

I came to South Africa in 1966 as a Chartered Surveyor with the benefit of a 1961 B.Sc.(Estate Management) Degree from London University, at a stage when there were only two Universities in Britain offering such a property related degree; London University, through the College of Estate Management, which also handled RICS professional education, and the BA Land Economy degree at Cambridge University.

In 1978 I was persuaded by John Hermann to join the National Executive of the Institute, and served on such Committee for the next 26 years, with a twofold intention, to have IVS standards adopted in South Africa, and to encourage the raising of property valuation education standards to University Degree level, as at that stage only the National Diploma in Property Valuation was being offered.

In 1982, the year in which I became President of the Institute, the Valuers Act No.19 of 1982 was published, regularising the valuation profession, and including an “oupa clause”, to cover the registration of the many valuers in the country who at that stage had had no previous professional valuation training.

In 1985 I started my efforts on behalf of the Institute to gain membership of the IVSC Due to
United Nations resistance during the apartheid era, it was not until 1993 that the SAIV was invited to join the IVSC, and I attended my first Meeting of the IVSC in Melbourne that year as the SAIV representative.

At this initial Meeting, as the SAIV representative, I was privileged to have been able to participate in the determination of the IVSC definition of Market Value, which took place over a two day period, and was followed by Management Board agreement on the components of the conceptual framework application of such definition, which the Management Board considered to be very necessary..

For me It was very interesting at that Meeting to experience the differential approaches of the main protagonists leading up to the settlement of such Market Value determination, being USA, Australia and the United Kingdom , while I had provided some input with regard to the more simplistic third world approach.

Following the SAIV joining of the IVSC, I served an Elected Member of the IVSC Management Board for the ensuing 11 year period.
In 2003 the SAIV adopted the IVSC definition of market value, and in 2005 adopted IVS 2005 in toto as its own SAIV Standards, which were then reproduced in full in the SAIV Members’ Handbook.
The Institute later terminated the issue of the Members Handbook containing the 2005 SAIV Standards to new SAIV Members. As a result, such new SAIV Members were not aware of such SAIV adopted Valuation Standards, unless they have taken the trouble to approach the IVSC for their own individual copy.
In 2014 the SAIV was one of 19 international valuation profession bodies who signed the Memorandum of Understanding with the IVSC (SA Valuer Feb 2015 – page 38).
In terms of such Memorandum :

“The membership conditions of the IVSC state that Valuation Professional Organisation members (such as the SAIV) shall demonstrate :-

  • That the organisation requires or actively encourages its members to adopt the IVSs in so far as is consistent with the law in the State or States in which they operate;
  • That it has a policy of promoting the adoption and use of the IVSs within the markets in which its members operate.”

All SAIV Members have since been able to download IVS on the SAIV website, with IVS 2017 being now available.

In 2009, at the request of the statutory body for the profession, the South African Council for the Property Valuation Profession,(SACPVP) , I approached the IVSC on its behalf to seek Institutional Membership of the IVSC, which it duly obtained.

In February 2015 a Meeting took place between the SAIV and the SACPVP, at which it was agreed that, rather than the SAIV, the SACPVP would open negotiations with the IVSC to enable it to disseminate IVS 2015 to all registered valuers. The IVSC had indicated to me that this could be done by way of the adoption by the SACPVP of IVS 2015 as its own SA National Standards.

The current SACPVP web site indicates that it has adopted IVSC standards, in terms of which IVS 2017 has, for example , effectively become “generally accepted valuation standards” in South Africa in terms of Section 45.(1) of the Municipal Property Rates Act No.6 of 2004.

IVS 2017 is now available for downloading from the SACPVP website by all registered valuers.

As both the SAIV and SACPVP have now made IVS 2017 available for download on their respective websites, the question remains as to how many valuers across the country have in fact downloaded or regularly refer to IVS 2017 during the course of their valuation activities.

The responsibility for encouraging IVS 2017 devolves upon the SAIV in terms of its signature on the Memorandum of Understanding, through articles such as these, and workshops and other seminar activities for example.

In this regard the current IVSC programme to increase IVS awareness across the world is indicative of the concerns that it has with regard to need to generally improve valuation standards within individual countries all over the world, not only in those countries which have their own National Valuation standards such as the USA and the UK, which are now generally very closely linked with IVS.

South Africa has not been able to develop its own National Standards, and has accordingly welcomed the opportunity to adopt IVS, recognising that there are individual legislative implications within the country which have an underlying influence on IVS application.

One can only think of the Section 25. (1) –(3) within the Bill of Rights component of the Constitution, which states that :-

25. (1) No one may be deprived of property except in terms of the law of general application, and no law may permit arbitrary deprivation of property.

(2) Property may be expropriated only in terms of law of general application –

(a) For a public purpose or in the public interest; and
(b) Subject to acquisition and beneficial capital improvement of the property; and Compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.

(3) The amount of compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including-

(a) the current use of the property;
(b) the history of the acquisition and use of the property;
(c) the market value of the property;
(d) the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property, and
(e) the purpose of the expropriation.

With the risk of potential expropriation, the question arises as to what influence these provisions might have on the underlying Market Value assessment of such a potentially affected property.

In this regard, current pressure within the country for a change to the Constitution to allow for “expropriation without compensation” could further impact on the Market Value assessment of such potentially affected properties.

In the Cape Town CBD context the City densification intention process allows for a substantial increase in permissible bulk if the developer wished to erect additional residential units on such a property, which could have a significant influence on Market Value for redevelopment purposes.

Individual factors operating within a country can therefore have underlying implications on the assessment of Market Value in terms of IVS principles, reinforcing my IVSC personal quotation comment need that, in the first instance :-

“it is my view that IVS should be at the elbow of every valuer, from those involved in cross border transactions to those practising at a local level within small firms.”

I therefore strongly wish to encourage all Members of the Institute to have IVS 2017 downloaded and to hand, for appropriate application during the course of their varying professional valuation activities.

RS Marten B.Sc.(Estate Management) FIVSA Professional Valuer









































This publication is an attempt to share information of interest with members and readers. Articles on products and ideas featured in this publication from other sources do not of necessity carry the endorsement of SAIV unless explicitly so indicated.

SAIV Contributions
• Email or call  012 348 2757 to contribute news or provide comment etc.
• Email or call 012 348 2757 if you work for a member firm and would like to receive a copy of this newsletter directly.
• News of member firms is generally provided by the firms themselves or copied from their newsletters or articles published in the media.

Copyright © SAIV 2017