Will investors standardize appraisal practices in the European Union?

Abstract

Imagine, if you will, that each of the 50 US states is a separate country. Each has its own customs, currency, tax structure (income, sales, and import), and aviation regulations (including over-flight). Each has different forms of government and laws based on different legal systems (e.g. common law, Code Napoleon, monarchy). They each have their own language (some more than one), infrastructure, and economic systems (inclusive of banking, real property valuation and exchange, securities exchange, accounting, insurance procedures, and terminology). Each has some natural resources but none is selfsufficient. They must rely on each other and outside resources to maintain their standard of living. Some countries restrict or prohibit foreign ownership of real property or businesses. Some of the countries are ancient, like the UK, France, Sweden and Portugal, and some are more recent, as are Belgium and Italy. Some have exhibited political and economical stability over a long period, as have the UK, The Netherlands and Sweden, and some have seen radical changes, like Germany, Portugal and Spain. If you can put yourself in this setting, then you have some idea of what the international trader, investor, or appraiser of real property has faced in Europe.In earlier times, real property appraisers and the quality of their product generally matched the needs of the real estate market in which they worked [1]. Appraisers in traditionally international trading areas such as London and Amsterdam, became more sophisticated in their analysis, while those where the market was essentially internal continued with age old customs and procedures. In some countries, restrictions inhibited international investment in real estate; in others lack of economic control and market knowledge led to unbridled speculation. Overall, however, the system seemed to have been adequate until information became more accessible and cross-border trading became freer.The real property market boom of the 1980s and subsequent crashes in the 1990s were a wake-up call for the European Union (EU)[2] real estate professionals. In many cases the real property appraisers were blamed,

Professional standards: RICS Valuer Registration Scheme

“…There are many other countries around the world that have statutory or independent licensing of property valuers. Indeed, some member states within the European Union have similar systems to the USA and there has been discussion at the EU legislative level in the last 15 years about "increasing the scope of government legislation of appraisal standards" (Hordijk and Condit, 1997). To date, this has not come to fruition but many commentators believe that there is an agenda at the EU to replicate many of the licensing provisions for real estate already found in the USA.…”

Concepts of price, value and worth in the United Kingdom – Towards a European perspective

“…However, there is also a strong recognition on the part of valuers and academics that the process of harmonisation is not necessarily a smooth one due to incompatibility in valuers' qualifications and specific valuation practices (Bruhl, 1997). Other barriers to harmonisation discussed by Hordijk and Condit (1997) include variations between the European Union countries in terms of customs, currency, tax structure, forms of government, different legal systems, language, infrastructure, and economic systems (inclusive of banking, real property valuation and exchange, securities exchange, accounting, insurance procedures and terminology). Downie (1995) also pinpoints factors that may deter the possible development of common European valuation practices.…”

Valuing the client or the property?

“…On the second point, (structural) autonomy, it has been pointed out that since the 1990s, international harmonisation of valuation standards has gained momentum. In the EU, this includes increasing harmonisation and standardisation of valuation principles, procedures and reporting between countries (Hordijk and Condit, 1997;MacParland et al, 2002). Also important in this regard was the call for harmonisation from the international banking community in the 1990s, through the medium of the Basel Committee, due to the large number of loans that are secured on real estate (Eriksson et al, 2005).…”