The Role of Property Valuation Standards by Philippe Malaquin (France)

Synopsis

The development of valuation standards in Europe was born out of concern with corporate accounting issues, which led to the Fourth European Directive (1975-1978). In 1977, The European Group of Valuers of Fixed Assets (TEGOVOFA) published the "Guide Bleu", the first set of continental standards following British initiatives between 1972 and 1975. TEGOVOFA merged with EUROVAL in March 1977 to become TEGOVA.

In 1982, a broader based International Asset Valuation Standards Committee was formed, later changing its name to the International Valuation Standards Committee (IVSC) in 1996. European valuation standards became mandatory in 1994. ISVC is a member of the International Accounting Standards Committee, a body set up to develop international accounting standards.

In addition to work in Western Europe, IVSC has furthered its influence into the former Eastern Bloc countries and into some Asian countries.

Synopsis

More change has occurred in the approach to plant and machinery valuation in the last 15 years than in the previous 100. A significant move has been away from insurance and balance sheet appraisal towards event driven instructions. Bankers' requirements currently drive a high proportion of valuation work.

Privatisation valuations are a major source of work, especially in Central Europe, CIS and China. There are various kinds of privatisation work, as well as opportunities for post-privatisation valuation work.

Competitive pressures are driving a more cost-effective approach to appraisals. The 80/20 rule concentrates on items of high value. Use of proformas is also discussed, and valuations for asset based lending.

The characteristics of operating leases and finance leases are discussed. Lessors require certain equipment from their valuers. Plant and machinery valuers face fewer problems working overseas than real estate appraisers. The principal differences between overseas and domestic valuations are listed. The special problems acquiring cost data in Central Europe and the CIS are discussed.

The effect of transport costs, taking account of taxes and duties on capital equipment is discussed. Other topics include differential labour rates, the impact of information technology on site, in the office and support systems, and the fact that computers are not widely used on the shop floor due to practical problems. Other information technology points include barcode tagging systems; use of portables/notebooks on site; data acquisition by email and via floppy disk; electronic service to some clients; computerized databases; and custom software as valuation aid.

Also discussed are RICS and other guidance notes, Chartered Surveyors obligation to comply with the Red Book, and other guidance notes and attempts to harmonise. Current Red Book valuation bases for financial and market appraisals are touched on, to conclude with a summary of future prospects - where the profession seems to be heading.

Synopsis

For ages, the diverse histories and cultures of the European nations have challenged professionals and politicians who have attempted to refine international cooperation and trade. The turbulent history of the attempts to develop a single European market and European currency attests to that. Efforts to standardize appraisal practices have been no less challenging.

Three groups have been prominent in this effort: Inter-European appraiser organizations, professional organizations, and the real property investors. Experience with the ROZ/IPD Index (a comparative data analysis) indicates that the investors are forcing the creation of national and international appraisal standards in order to accomplish their investment goals and minimize risk.

Synopsis

This paper is based on research seeking to develop a Computer Assisted Mass Appraisal (CAMA) model capable of use within a Geographic Information System (GIS). The end product will be a working GIS/valuation integrated model. The model, in an operational context, can be utilised for property taxation purposes to facilitate the rating and reevaluation of residential properties in Northern Ireland.

The value of land and property is a function of economic, legal, physical and locational factors. Consequently, access to comprehensive, reliable and up-to-date transaction evidence, is a prerequisite to property valuation. Valuation techniques depend on the collection and analysis of relevant data. Historically, the application of these techniques took place within a non-spatial environment. Ultimately, market data supports any estimate of value. Data searches and collection can prove both time consuming and expensive in relation to the fee earning potential of a valuation report.

GIS can facilitate, in a spatial and aspatial context, the storage, manipulation and analysis of data, in a fraction of the time previously required. Current techniques for the mass appraisal of property, and for the prediction of residential property values, can be enhanced by utilising the data handling capacity of GIS. Integration of a mass appraisal model within a GIS will add value to the valuation process. Furthermore, the Internet can increase the operational range of services on offer.