EVS Wolfgang Kaelberer, Hon REV. Global Valuation Opportunities and Challenges: European Valuation Standards

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1 Global Valuation Opportunities and Challenges: European Valuation Standards EVS 2016 Wolfgang Kaelberer, Hon REV Member of the Board of TEGoVA Member of the EVS Standards Board 1

2 Resolved to: remain clearly focused on real estate; provide additional guidance and technical information; meet the diverse needs of the 63 TEGoVA TMA s; concentrate on high level principles. 2

3 Meeting the objectives: follows the direction of previous editions; informed by existing and emerging European regulation; yet upholding the scientific and professional obligation on the valuer. 3

4 Status ECB Recognition (May 2014) Real estate should be valued in line with European Valuation Standards 2012 (Blue Book) and anther international standards - where a conflict is seen EVS 2012 will apply for the avoidance of doubt (Asset Quality Review) Mortgage Credit Directive (2014/17) In order to be considered reliable, valuation standards should take into account internationally recognised valuation standards, in particular those developed by the European Group of Valuers Associations... (Recital 26)der to be considered reliable, valuation standards should take into account inter 4

5 EVS 2016 provides: harmonised European standards, guidance and technical information; designed for use by all sectors of the European valuation profession; corporate governance and ethical considerations embedded within the standards. 5

6 Divided into four parts: Part 1 Part 2 Part 3 Part 4 European Valuation Standards and Guidance Notes European Codes European Union Legislation and Property Valuation Technical Documents 6

7 European Valuation Standards EVS 1 Market Value EVS 2 Valuation Bases Other than Market Value EVS 3 The Qualified Valuer EVS 4 The Valuation Process EVS 5 Reporting the Valuation all have been refined and reinforced 7

8 EVS 1 EVS 1 Market Value - expanded to include a definition of Market Rent The estimated amount of rent at which the property should be leased on the date of valuation between a willing lessor and a willing lessee on the terms of the actual or assumed tenancy agreement in an arm s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without being under compulsion. 8

9 EVS 2 EVS 2 Valuation Bases other than Market Value Fair Value, Special Value, Investment Value, Mortgage Lending Value (MLV), Insurable Value Fair Value: distinguishes general definition for valuation from specific accounting definition MLV: extends the commentary, informed by Regulation (EU) No 575/2013 (CRR) the value of immoveable property as determined by a prudent assessment of the future marketability of the property taking into account long term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property. 9

10 EVS 3 EVS 3 The Qualified Valuer, expands the requirements - not only competent to act, but also independent and without any undisclosed potential conflicts of interest: Any connection, other potential conflict of interest or other threat to the valuer s independence and objectivity, should be disclosed in writing to the client and recorded in the valuation report. 10

11 EVS 4 EVS 4 The Valuation Process -incorporates and amends guidance published in 2013 relating to terms of engagement. Data retained following the submission of a valuation must be sufficient to enable verification that the analysis and evaluation undertaken in the approach, or approaches, to providing the opinion of value reported were sufficient for the type and scale of valuation 11

12 EVS 5 EVS 5 Reporting the Valuation -provides commentary on situations where opinions of value in the longer term are requested - while such an approach may be useful.. It will not be a measure of Market Value 12

13 European Valuation Guidance Notes EVGN 1 Valuation for the Purpose of Financial Reporting EVGN 2 Valuations for Lending Purposes EVGN 3 Property Valuation for Securitisation Purposes EVGN 4 Assessment of Insurable Value and Damages 13

14 European Valuation Guidance Notes EVGN 5 Assessment of Investment Value EVGN 6 Cross-border Valuation EVGN 7 Property Valuation in the Context of the Alternative Fund Managers Directive 14

15 European Valuation Guidance Notes EVGN 8 Property Valuation and Energy Efficiency EVGN 9 EMF / TEGoVA Commercial Loan Specification EVGN 10 Valuations: Compliance with EVS 15

16 New Guidance Notes: EMF + TEGoVA Commercial Loan Specification Valuations: Compliance with EVS 16

17 Part 2 European Codes: EC 1 European Valuers Code of Ethics and Conduct EC 2 European Code of Measurement 17

18 Part 3: European Union Legislation and Property Valuation 1. General Introduction 2. The EU Internal Market 3. Health and Safety 4. Energy 5. Environment 6. The Common Agricultural Policy 18

19 Part 4: Technical Documents EVIP 1 Sustainability and Valuation EVIP 2 Valuation Certainty and Market Risk EVIP 3 Apportionment of Value between Land and Buildings EVIP 4 Valuation and Other Issues for Recurrent Property Tax Purposes 19

20 EVIP 5 Valuation Methodology EVIP 6 Automated Valuation Models (AVM) EVIP 7 European Property and Market Rating: A Valuer s Guide EVIP 8 Fair Value Measurement under IFRS 13 20

21 . also in Part 4 Summary of TEGoVA s Minimum Educational Requirements Summary of Recognition of Qualifications: TEGoVA s REV and TRV Programmes Glossary 21

22 New Technical Documents Valuation Certainty and Market Risk Automated Valuation Models (AVM) 22

23 Global Valuation Opportunities and Challenges: Valuation Co-operation beyond Europe? Mutual Recognition of Valuation Standards and Qualifications? What do we have in TEGoVA? Minimum Educational Requirements, MER Code of Conduct EVS 2016 Involvement in Education Recognised European Valuer REV and TEGoVA Residential Valuer TRV 23

24 What is the Rationale for Strategic Partnerships? Shared goals and shared problems, e.g. reputational damage to valuers from recession poor fee income from a low value or devalued product the Green Agenda are valuers ready? challenges arising from the use of AVMs strength in Co-operation 24

25 Strategic partnerships are an invitation to those with a shared ethos in order to address Synergy in goals Synergy in Education Standards Synergy in Valuation Standards Synergy in Qualifications On an equal basis There is no need to subscribe to a global standard that is in a hierarchy. We look to the best that exists in a comparable form and respect those other standards on an equal basis Yet we respect the difference 25