The Use of Heuristics within the Valuation Profession in Kenya

Abstract

The use of heuristics is common within the valuation profession in Kenya, mainly because of the country’s valuation environment characterised by limited information. Although heuristics can be useful when assessing market value in imperfect markets, their inappropriate use can contribute to valuation inaccuracies. There is limited research on the effects of heuristics on the valuation industry in developing countries, with no comprehensive study in Kenya. The study’s main objective is to establish the positive and negative effects of anchoring and adjustment heuristic on the valuation profession in Kenya while identifying the significant types of heuristics within the industry. The study used a quantitative research design involving a survey of registered and practicing valuers in Kenya. Findings indicate the presence of anchoring and adjustment heuristic and that valuers adopt this type of heuristic to solve information problems while improving valuation accuracy. Further, the study found that inappropriate use of anchoring and adjustment heuristic contributes to valuation inaccuracies; it is the second most prevalent after positivity heuristic. The study contributes to knowledge as it builds on the existing literature by providing additional empirical support on the effects of heuristics on the valuation profession while recommending appropriate measures to improve the profession.

Keywords:

• Valuation
• heuristics
• limited information
• valuers
• market value
• Kenya

Acknowledgments

We would like to express our sincere gratitude to the University of Cape Town for providing us access to its extensive library and reading materials. We also thank the following individuals who provided invaluable support throughout the research: First and foremost, we thank our respondents for their time and insights that made this study possible. We would also like to acknowledge Prof. Kathy Mitchel for her support whenever we needed to use the survey monkey platform. Finally, we extend our appreciation to Anneli Hardy from the University of Cape Town statistical consulting team for valuable insights on quantitative data analysis.

Disclosure statement

The authors declare no conflict of interest.

Additional information

Notes on contributors

Irene Cheloti

Irene Cheloti is a registered and practicing valuer in Kenya and a lecturer at the Department of Construction and Real Estate Management at Kenyatta University. She holds a PhD in Construction Economics and Management from the University of Cape Town, an MA in Valuation and Property Management and a BA in Land Economics from the University of Nairobi.

Manya Mooya

Manya Mooya is currently a Professor of Property Studies in the Department of Construction Economics and Management at the University of Cape Town. He holds a PhD in Real Estate from the University of Pretoria, an MPhil in Land Economy from the University of Cambridge and a BSc in Land Economy from the Copperbelt University.