Real estate valuation plays a key role in the economy of any country, as it influences investment decisions, taxation, lending and other aspects of financial activity. International Property Valuation Standards have been developed to ensure transparency, consistency and reliability of the valuation process. These standards provide the basis for fair and objective real estate valuation, which is important for both domestic and international markets.
Basic international standards for real estate valuation
International Valuation Standards (IVS)
International Valuation Standards (IVS) were developed by the International Valuation Standards Council (IVSC). IVS define generally accepted methodologies and principles that should be used by appraisers to ensure consistency and accuracy of real estate appraisals. Key provisions of the IVS include:
- Valuation Principles: Basic principles such as fair value, market value and value in use.
- Valuation methods: Basic methods including comparative method, income method and cost method.
- Ethical standards: Ethical standards for evaluators, including confidentiality, independence and professional competence.
European Valuation Standards (EVS)
European Valuation Standards (EVS) were developed by the European Group of Valuation Associations (TEGoVA). EVS have similar objectives to IVS, but take into account the specific requirements of European markets. Key aspects of EVS include:
- Quality Assurance: The importance of quality control and assessor training.
- Legal Compatibility: Compliance with legal and regulatory requirements of the European Union.
- Sustainable development: Incorporating environmental and social aspects into the assessment process.
RICS Property Valuation Standards
The Royal Institution of Chartered Surveyors (RICS) has also developed its own valuation standards, known as the Red Book. These standards are used in many countries and are one of the most recognized in the world. The main elements of the RICS standards include:
- Professional Ethics: Mandatory requirements for the professional conduct and ethics of appraisers.
- Technical Standards: Detailed methodologies and procedures for valuing various types of real estate.
- Documentation and reporting: Standards for preparing assessment reports, including disclosure and transparency requirements.
Real estate valuation methodologies
Comparative method
The comparative method is based on an analysis of market prices for similar real estate properties. This method includes the following steps:
- Data collection: Collection of information on the sale of similar properties.
- Price adjustment: Making adjustments for differences between the valued object and analogues.
- Market Analysis: Assess current market conditions and trends.
Income method
The income method is based on an analysis of the income that a property can generate. Key steps include:
- Income Forecast: An estimate of the potential income from the rental or use of a property.
- Cost analysis: Estimation of the costs of maintaining and operating the facility.
- Earnings Capitalization: Converting expected earnings into present value using a capitalization rate.
Cost method
The cost method estimates the value of real estate based on the costs of its reproduction or replacement. This method includes:
- Cost Estimation: Determining the current costs of constructing a similar facility.
- Accounting for wear and tear: Adjustments for physical, functional and economic wear and tear.
- Added value of land: Estimation of the value of the land plot on which the object is located.
The importance of international valuation standards
Transparency and trust
International valuation standards help increase transparency and confidence in real estate valuation results. The use of uniform standards allows market participants to be confident in the objectivity and accuracy of assessments, which is especially important for international investors.
Data comparability
The use of international standards makes it possible to compare data on the value of real estate in different countries. This is especially important for global companies and investors who operate in multiple markets simultaneously.
Risk reduction
Using standardized assessment methods reduces the risks associated with assessment errors. This helps to more accurately determine the market value of real estate and reduce the likelihood of financial losses.
Support for sustainable development
Modern international valuation standards include aspects of sustainable development, which contributes to the consideration of environmental and social factors when valuing real estate. This is important for creating sustainable cities and regions, and for attracting investment in environmentally friendly and socially responsible projects.
Conclusion
International real estate valuation standards play a key role in ensuring fairness, transparency and reliability of real estate valuations. Their use contributes to the development of the international real estate market, increasing investor confidence and reducing risks. In the future, international standards will continue to evolve, taking into account new trends and challenges such as sustainable development and technological innovation.
