Property valuation in the Nordic countries - KTI

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In Denmark and Norway there is a quite large part (over 20%) of sales where the sale price was more than 30 % higher than the preceding market value. In the other end, in Finland the share of sales with more than 30 % discount compared to the preceding market value, was larger than in other Nordic countries. In all the countries a clear majority of the sales has been above the preceding market value. For the period 2002 to 2011 the share of transactions above their adjusted preceding market valuation varies from 74 % (Sweden) to 61 % (Finland). For the two most recent years the share is even higher, which can be seen in figure 4.6. The proportion of sales above their adjusted preceding market valuation varies from 76 % (Denmark) to 70 % Finland. 4.6 Sales prices vs market values Proportion of sales sold below/above their preceding Market Adjusted Valuation, aggregated results for 2010 & 2011 Denmark Finland Norway Sweden -30 -20 -10 0 10 20 30 40 50 60 70 80 % Below Above Source: IPD, KTI 28 Property valuation in the Nordic countries
5 Future trends and challenges in the property valuation industry In the interviews conducted during the project, the views of the different players were also asked regarding the future trends and challenges of the property valuation industry in the Nordics. A rather wide spectrum of different kinds of trends and challenges were identified, of which the most important ones are summarised below. Firstly, maintaining the quality and credibility of valuations was seen as a major challenge by most interviewees. This challenge is caused by the increasing number of valuers and harder price competition, on the one hand, but also due to the challenging economic climate. In Sweden and Finland, the current quality of valuations was generally seen to be in a good level, while in Norway and Denmark the whole property valuation industry is still emerging. In Denmark, the investors especially demanded for a clearer definition of the valuation yield and increased transparency for the underlying assessments and assumptions for the valuation yield. In Norway, the investors pointed out that valuations should be more comparable between the different valuation firms, and also desired an adoption of “Verdivurderingssammendraget” for the whole valuation industry. Secondly, low transparency regarding especially market information on transactions, was seen as a challenge in all Nordic countries – despite the fact that the Nordic countries, Sweden and Finland in particular, are commonly regarded as very transparent markets in international comparison. The need for the better quality market data was widely recognised among valuers, investors, auditors and also lenders. 5.1 Auditors calling for transparency, lenders point out energy efficiency matters All interviewed auditors stated that improving transparency and ensuring the quality of market data is very important. Also the independence of valuers was mentioned as an important factor. Internationalisation and closer integration across the Nordic countries was also brought up as an important future development of the industry. The further integration of the Nordic property markets could have a positive effect on all Nordic markets, especially other countries could learn from the practices of the Swedish market, which is generally seen as the most developed property market in the area, in terms of for example transparency and attraction of foreign capital. Lenders in particular call for the consideration of energy efficiency in valuations. However, there is not much empiric data available on the impact of energy efficiency on the market value of properties, and this requires thus further analysis and development. It was also noted that the valuers will have to learn about new construction materials and techniques. Lenders also considered the effects of the new regulations, e.g. Basel III. The frequency of valuations is likely to increase due to increased need for reporting. Property valuation in the Nordic countries 29
Page 1 and 2: Property valuation in the Nordic Co
Page 3 and 4: Executive summary The “Property v
Page 5 and 6: 1 Introduction This report summaris
Page 7 and 8: In the first half of 2012, the tran
Page 9 and 10: 3 Property valuations in the Nordic
Page 11 and 12: 3.4 Key findings from the interview
Page 13 and 14: The usage of DCF model for valuatio
Page 15 and 16: In Norway, the consensus was that t
Page 17 and 18: 3.6 Contents in the valuation repor
Page 19 and 20: The most common sources mentioned f
Page 21 and 22: The figure also reveals that the yi
Page 23 and 24: 4 Comparison between sale prices an
Page 25 and 26: 4.2 Sale prices vs market values We
Page 27: 4.3 The distribution of the differe
Page 31 and 32: 5.1 The main future trends and chal
Page 33 and 34: Appendix 2: The calculation methods
Page 35: KTI Finland is an independent resea

Property valuation in the Nordic countries - KTI

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