Professionals learn investment skills

BEING a property professional is not what it used to be. Not too long ago, it seemed little more was required than a basic knowledge of property regulations and valuation techniques.

Now a growing number of other skills is needed. In particular, it has become increasingly important for practitioners to understand property as an investment class in the context of other investments.

That has been difficult for the industry to come to terms with. Many experts at big firms and institutions are still hard put to offer advice about tax and regulatory requirements for property, let alone discuss comparisons with investments like equities and gilts.

The Investment Property Forum, a nine-year-old organisation aiming to increase understanding about property as an asset class, argues that this is a serious problem, at a time when real estate is steadily declining in popularity in the eyes of institutional investors.

It's a very big issue because property is always the poor relation at the investment table and property people in business often lack the background to argue their case properly, says Mr Rupert Clarke, head of project finance at Jones Lang Wootton, the property consultants, and head of marketing at the IPF.

The lack of skill is by no means universal, but it is clear that many investment property practitioners cannot talk the language of other investment markets and are therefore at some disadvantage.

In contrast to some of the other reasons for property's recent unpopularity with investors, such as its illiquidity and relatively poor long-term performance, it is a deficiency that should be easy to correct.

To that end, the IPF has published two reports on the issue, one examining the educational research role it can undertake for members, and a second outlining the standards and skills required to improve property professionals' understanding of investments.

The first study confirmed the perception that some investors no longer feel property advisers can offer the breadth and quality of advice available elsewhere. More importantly, it found substantial evidence of unmet demand for courses on various aspects of the property investment market.

The second report sets out what types of qualifications should be offered. These include changes to property qualifications to incorporate more investment-related issues, as well as programmes for mid-career professionals who want to be brought up to date with the rapidly changing market.

It suggests there are deficiencies in three broad areas - the structure and operation of investment markets, portfolio management techniques and property finance and funding.

The IPF has already commissioned a follow-up to the educational research document to look at which institutions are best placed to meet the demands. The skills report is out for consultation with members, and a final version will be made available to the whole industry this summer. The Royal Institution of Chartered Surveyors and the British Property Federation have voiced support for both studies and the overall objective.

The goal is to create a series of structured education programmes for practitioners, possibly starting as early as the beginning of next year, covering concepts ranging from property risk models to historical performance analysis.

The IPF would probably not fund or operate such courses directly - although it would continue its system of lectures and workshops - but Mr Clarke suggests it could help define content and assess the effectiveness of any new courses.

The proposed changes also have repercussions for the debate over whether property should be regulated like other investments.

At present, direct property does not fall under the Financial Services Act. However, when practitioners offer advice on collective investment schemes, derivatives and other indirect vehicles, they must seek authorisation via either the Investment Management Regulatory Organisation or the Securities and Futures Association.

If the IPF's proposals are implemented, they would give practitioners access to a set of recognisable investment qualifications that demonstrate the requisite threshold competency requirements under the act.

But while the initiative is being widely welcomed by most professionals, there are sceptics. As one senior property fund manager points out, as long as surveyors and property consultants are paid by volume rather than value, it will remain in their interest to push a transaction through rather than give the best investment advice to clients.

It doesn't really matter if they understand about property performance unless other changes are made as well, he warns.

Education is a great thing and can only enhance the profession, but until institutions start realising they need a very different kind of advice we will not get a new paradigm in real estate investment.

Nevertheless, according to the IPF's best estimates, there is already a potential market of about 3,500 people in the UK wanting to take property investment related courses, with the number set to grow.

And with a range of securitised property vehicles now on the horizon trying to revive institutional interest in the sector, such programmes should help to bring property into the wider investment arena.

There is strong demand (for property investment qualifications) and an identifiable solution, says Mr Clarke. Better investment education will improve understanding and knowledge of property as an asset class and that can only be good for the sector.