How Automation Can Support Institutions in Mass Residential e-Valuation

Traditional online property valuation systems in Hong Kong rely on manual evaluation. The process usually faces time lag and inconsistent results due to human judgment. This shortcoming is particularly evident when market conditions change substantially every month. To overcome these limitations, CBRE has developed a new generation of Automated Valuation Model (AVM) for the mass residential market which has achieved breakthrough advancements in terms of technology, accuracy and professionalism.

CBRE AVM uses AI technology to standardise the process through algorithms and searches for the most suitable transactions in the market. It then conducts professional analysis and comparison with the target property based on our pre-defined adjustments. Adjustment factors include building age, time, floor level, view, size, etc. Therefore, each valuation result is an independent assessment and can accurately reflect the uniqueness of the property from the latest transactions. Compared with the traditional method of manual data collection resulting in data lag, CBRE AVM has obvious advantages.

Algorithms to reduce human errors and enhance accuracy
CBRE AVM uses pre-defined algorithms to systematically process data (e.g., attribute characteristics) to minimise errors. This can eliminate bias or oversight of comparability. 

For example, when the market fluctuates, the price of properties in the same housing estate but with different blocks may rise or fall inconsistently. However, as AVM uses the most recent transactions within the same location or development of the subject property, it can accurately reflect the latest value movement. 

CBRE AVM can also provide accurate valuation by comparing with the latest transaction price. When the environment changes, such as a new building blocking the view of the subject property, the traditional model may not be able to reflect this factor. 

Improve productivity and efficiency at low cost
The traditional model requires many manpower, constant updating and maintenance of the system, and is prone to problems such as data input errors. CBRE AVM, on the other hand, can generate valuations less than 30 seconds, enabling rapid scalability. Automation does not involve the need for human evaluation and enables clients to process large volumes efficiently. No manual input is required at the back end, which can avoid errors.

With a fixed annual subscription fee, the clients can enjoy unlimited e-valuation searches, resulting in long-term cost savings for their operation. 

Reliable data sources
Our AVM relies on well-founded and accurate data. It is mainly based on the information from the Government such as the Rating and Valuation Department, the Buildings Department, the Land Registry, etc. for saleable area, building age, transaction records, time index, and so on. 

Information from sales brochures after Residential Properties (First-hand Sales) Ordinance are also important for building the data. View of all units as one of critical factors in valuation have been all collected and verified by our experienced valuers for comparison. We are allocating sufficient manpower to constantly review the data accuracy since its launch.

Credit and risk quality control
CBRE AVM is based on purely objective data analysis, eliminating subjective bias. Therefore, it is helpful for financial institutions to use it for the first-round quick sanity check as a credit quality control.

The AVM targets on banking sectors, which usually possesses a huge amount of mortgage applications and involves a regular review of portfolios. The process requires the most efficient, updated and unbiased valuation for loan credit and risk management.

No time and location limits
CBRE AVM adopts advanced cloud technology to digitise standard valuations and can provide 24-hour services without geographical boundaries, which is very suitable for the needs of the financial and banking industries. It is convenient when an urgent preliminary indicative valuation is needed during non-office hours or holidays in anywhere.

Precise building’s latitude and longitude
Each building’s latitude and longitude have been saved in AVM. Applying map coordinate technology, our AVM selects transactions in the nearest target radius for comparison analysis. Apart from indicating the preliminary figure, AVM could also show the exact location of the subject property in Google map (street view function is available) for client’s easy reference. 

Challenges
Of course, CBRE AVM still has certain challenges. Since the AVM relies on the latest data, if the transaction data is inconsistent or insufficient, the resulting valuation will also be affected. Developers currently use a variety of methods to sell first-hand properties, and agent rebates are not reflected in the transaction price, so valuers are still required to properly screen the relevant data. As our AVM requires a large amount of transaction data, it can currently be applied to mass residential e-valuations. E-valuation is not currently supporting for those special units, HOS units, presale units and luxury houses/apartments given that the standard adjustments may not be applicable. 

The AVM also comes with certain liabilities and responsibilities that must be understood. Therefore, we propose that our AVM is used only for reference purposes with the following benefits:

• First Round Sanity Check: We recommend that clients use our AVM as an initial sanity check to get a preliminary understanding of the property's value. This helps in identifying any glaring discrepancies early on.
  
  
• Verbal Reference Number: For a more accurate and reliable valuation, we advise clients to call us for a verbal reference number. This allows our experienced valuers to provide insights based on their professional judgment and consideration of unique property characteristics and market conditions.