Automated Valuation Models for Mass Valuation Purpose in Latvia

1
Automated Valuation Models for Mass Valuation
Purpose in Latvia

• Workshop On Automated Valuation Models Of Real
  Estate For Cadastre Purposes,
• Santiago de Compostela, Spain

October 19-20 2006
2
General Data
GeographyLocation Eastern Europe, bordering
the Baltic Sea, between Estonia and
Lithuania.Area 64 100 sq. km. (25 640 sq.
mi.)Terrain Fertile low-lying plains
predominate in central Latvia, highlands in
Vidzeme and Latgale to the east, and hilly
moraine in the western Kurzeme region. Forests
cover one-third of the country, with over 3 000
small lakes and numerous bogs. PeopleNationalit
y Latvian's.Population 2.33 million.
Capital Riga (740 000) Other Cities Daugavpils
(113 000) Liepaja (87 000) Jelgava (66 000)
Jurmala (55 000) Ventspils (44 000) Rezekne
(38 000).
3
State Real Estate Cadastre Information System
(Cadastre)

• Number of objects in Cadastre (on 01.09.2006)
• Real property objects
• land units 950 000
• constructions 1 350 100
• groups of premises 1 652 400
• Real estate
• land estate (land with buildings incl.) 676 000
• building estate (land for rent) 37 800
• apartment properties 532 500

4
Development of Mass (Cadastral) Valuation in
Latvia (1)

• After restitution of independence (1990),
  enforcement of land reform took place in Latvia
• main tasks of land reform restitution of
  property rights (for real owners and their
  inheritors)
• restitution of property rights has constitute
  ground for development of land valuation
  principles.
• Until the year 1994 cadastral valuation
  (agricultural land) and inventory of buildings
  and structures (replacement of building costs)
  has based on formerly applied approaches
  (valuation methods).
• From the year 1994 introduction of new, on the
  market data based approach for valuation of urban
  land (land value zonings).

5
Development of Mass (Cadastral) Valuation in
Latvia (2)

• In 1997 first mass valuation took place for the
  purpose of real property taxation.
• From the year 1998 Law On Real Property Tax
  became into force, and mass valuation procedure
  obtained obligatory status.
• In the year 2000 valuation of buildings took
  place for cadastral valuation purposes.
• Until the year 2006 updating of cadastral
  values take place for municipal units (towns and
  rural municipalities) and groups of objects of
  valuation (land, buildings).
• From the year 2006 Law On Cadastre became in
  to force for regulation of Cadastre system,
  included cadastral valuation (first law on
  Cadastre after gaining of independence and
  starting point for transition period of existed
  cadastral valuation system).

6
Legal Framework

• Cadastral (mass) valuation
• Law On Cadastre" into force since January 1st,
  2006
• Regulations of Cabinet of Ministers Regulations
  on Cadastral Valuation Regulations 305
  April 18th 2006.

7
Procedures

• Procedure of cadastral valuation
• State Land Service (SLS) responsible
  institution for cadastral valuation of real
  property (development of value zonings and
  determination of indexes of cadastral value basis
  base values and correction coefficients)
• Cabinet of Ministers conforms value zonings and
  cadastral valuation indexes
• SLS automated valuation according data of
  Cadastre (all registered objects).

8
Work Organization (SLS)

• Organization of procedures take place in three
  levels
• Central unit development of methodic and
  models, analysis of market data (for all
  country), participation in development of
  cadastral valuation indexes, management of
  cadastral valuation process in general
• Regional centers (8) coordination of cadastral
  valuation process in local level (bureaus)
• Bureaus (28) development of value zonings
  (local administrative units) and participation in
  the development of cadastral valuation indexes.

9
Software

• Collection and processing of market data
  special program on the platform of Oracle
• for data collection online processing
  transactions data base (OLTP)
• for data processing online analytical
  processing data base (OLAP), Oracle Discoverer.
• For statistic processing of data Statistical
  Package for the Social Sciences (SPSS).
• For testing of indexes of cadastral valuation
  special software on the Oracle platform for data
  processing OLAP data base, Oracle Discoverer.
• Automated valuation of objects all models are
  integrated in Cadastre System (special software,
  on the Oracle platform).

10
Development and Testing of Valuation Models

• Determination of characteristic data of valuation
  objects which theoretically have impact on value
  according comparable (similar) objects in
  Cadastre System
• Creation of experimental model of valuation
• Determination impact of used factors according
  methods of statistic analysis
• Testing of cadastral valuation indexes (basic
  values, correction coefficients etc.)
• Regular testing of cadastral valuation indexes
  (take place after valuation of all objects).

11
Determination of Indexes for the Purpose of
Cadastral Valuation until the year 2006

• Development of cadastral valuation indexes and
  value zonings took place for all groups of
  valuation objects within administrative units
  (urban and rural).
• Problems
• cadastral valuation indexes and value zonings are
  developed for particular municipalities and whole
  state is not treated in the same time
• unequal situation between municipalities
• discrepancy with real estate market.
• cadastral valuation indexes of land and building
  are developed not in the same time
• special development proposal is needed
  prescribed procedure
• municipalities have wide possibilities to affect
  results procedure of conforming.

12
Determination of Indexes for the Purpose of
Cadastral Valuation after the year 2006

• Regular (each 4th year) determination of
  cadastral valuation indexes take place for
  specific valuation objects (type of property) in
  the same time for land and buildings
• For rural properties development of zonings of
  agricultural land and forest land on the first
  time in the year 2007
• Residential properties development of
  residential properties zonings on the first
  time in the year 2007
• Industrial type of property development of
  industrial properties zonings (as well as
  determination of indexes for engineering
  structures) on the first time in the year 2008
• Commercial and public property development of
  commercial properties zonings on the first time
  in the year 2009.
• Estimation of real estate market correction
  coefficients will take place after two year time
  period for each developed value zoning (other
  indexes will remain unchanged).

13
Methods of Valuation

• To determinate indexes for cadastral valuation
  purposes are used internationally well-known
  methods of valuation
• Sales comparison method
• the most applicable method for valuation of
  land for construction and agricultural
  properties as well as for development of
  cadastral valuation basis for building cadastral
  valuation
• Income (capitalization) approach
• for development of cadastral valuation basis of
  forest land
• Coast approach method
• for development of cadastral valuation basic
  values of buildings and engineering structures.

14
Applicable Information

• For development of indexes of cadastral valuation
  and value zonings
• Real estate market data (sales and rent
  information, construction costs, supply and
  demands, market trends and activity)
• Undirected information main factors of impact
  on sales prices (on the basis of market data
  analysis)
• Local territorial plans and detail plans, other
  information regarding infrastructure development
• Information of legal acts (borders of
  preservation areas, nature preservation areas)
• For mutual comparison of municipalities social
  economic information of the specific
  municipality, statistics unemployment, number
  of economic active population, demographic data
  etc.

15
Application of Market Information

• Regular updating of data base (actual
  information)
• real estate market data from Land Book Register
  (legal agreements)
• characteristic data from Cadastre System.
• All developments based on the real estate
  market information (for the time period no less
  than 2 years).
• Selection of data for development of cadastral
  valuation indexes
• mathematic approach for separation of untypical
  data
• individual approach manual evaluation of data
  and comparison of data with accessible
  information.

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Object of Valuation

• Land according use of the land
• Land for construction purpose 9 groups, incl.
• Land for single residential houses
• Land for multilevel residential buildings
• Land for construction of commercial objects
• Land for industrial objects.
• Rural (agricultural) land 3 groups, incl.
• Agricultural (arable) land
• Forest land
• Land under waters.
• Buildings 105 types of buildings (9 groups)
• Engineering Structures 703 types (89 groups)
• Real property.

17
Land for Construction (1)

• Main factors of valuation of land for the
  construction purpose
• Land area (m2)
• Location (in the country, with in borders of
  municipality)
• Restrictions of land use
• Use of real property (land use type).

18
Land for Construction (2)

• Algorithm (formula) for calculation of cadastral
  value
• Kv cadastral value (in Latvia's currency,
  lats Ls)
• Bv basic value of land for construction use
  (Ls/m2)
• PLM area of land use type (m2)
• Ksamaz correction coefficient of area
• KT market correction coefficient
• Kapg correction coefficient of impact of
  restrictions
• Kp correction coefficient of pollution.

19
Land Value Level of Residential Land in Riga
(Capital City of Latvia)
20
Agricultural and Forest Land (1)

• Main factors of valuation of agricultural and
  forest land
• Land area (ha)
• Location (in the country, with in borders of
  municipality)
• Restrictions of land use
• Land use type
• Division of land use types (with in limits of the
  property)
• Quality of agricultural land (natural fertility,
  amelioration, conditions for mechanic
  cultivation)
• Quality of forest land (type of natural growth
  natural fertility, wetness)
• Possibilities of construction of buildings (or
  existed buildings).

21
Agricultural and Forest Land (2)

• Algorithm (formula) for calculation of cadastral
  value
• Kv cadastral value (in Ls)
• PLIZ area of arable land (in ha)
• Bvliz basic value for agricultural land
  (Ls/ha)
• PM area of forest land (ha)
• BvM basic value for agricultural land (Ls/ha)
• PP_Z area of other land (in ha)
• PP_D land under ponds and yards (in
  hectares)
• BvLIZ basic value of fertility of land
  (within limit of 3 groups) (Ls/ha)
• b indication regarding residential housing
• b 1 if there is one residential building
• b 0 if there are no constructions
• Cmaja constant coefficient of housing impact

22
Land Value Levels of Agricultural Land
23
Land Value Level of Forest Land
24
Buildings (1)

• Main factors of valuation of buildings
• Size (m2 m3)
• Location (in the country, with in limits of
  municipality)
• Restrictions of use
• Type of building
• Physical conditions.

25
Buildings (2)

• Algorithm (formula) for calculation of cadastral
  value
• EKV cadastral value (in Ls)
• EBv basic value for type of building
  (regarding size of building)
• A size of building (in m2 or m3)
• KS correction coefficient of physical
  condition of building
• Kkor correction coefficient of size impact
• Kli correction coefficient of restriction
  impact
• KT market correction coefficient.

26
Land Value Level of Residential Buildings
27
Engineering Structures (1)

• Main factors of valuation of engineering
  structures
• Size
• Location (in the country with in limit of
  municipality)
• Type of engineering structure
• Physical condition.

28
Engineering Structures (2)

• Algorithm (formula) for calculation of cadastral
  value
• IBKV cadastral value (in Ls)
• IBBv basic value for the type of engineering
  structure
• A size parameter
• KS correction coefficient of physical
  condition
• KT market correction coefficient.

29
Real Property

• Cadastral value of real property can be estimated
  as a sum of cadastral values of related objects
  (land, located buildings and engineering
  structures).
• Cadastral value of apartment can be estimated as
  a proportional part from sum of cadastral values
  of building, land under building and related
  functional buildings.

30
Accessibility of Information

• Value zonings and indexes of cadastral value
  basis of all municipal units are accessible in
  website of SLS www.vzd.gov.lv.

31
Application of Cadastral Value

• For real property taxation (main task)
• For stamp fees (Land Book fee, inheritance fee
  etc.)
• For land rent (in cases of enforced rent)
• For privatization of land under constructions
• For rent of unprivatized rural state and
  municipal land
• For estimation of value of comparable land
• For enforcement of land reform (estimation of
  number of vouchers).

32
Future Development

• Improvement of graphic data of value zoning maps
  (for the purpose of automatic zoning updating)
• In present automated zoning updating take place
  once a year (other time manual work)
• Digitization of fertility maps (agricultural
  land) development of data basis
• In present all actions are manual
• Improvement of valuation model of residential
  houses (additional characteristics well
  equipped, etc)
• In present there are some empty windows in
  Cadastre (no information or registration is not
  completely done).
• Improvement of graphic information of market data
  (automatic maps of transactions)
• In present all market data maps are manual.

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Thank You for attention!

• Questions please!
• Martins Lazdovskis
• martins.lazdovskis_at_vzd.gov.lv
• nivd_at_vzd.gov.lv
• www.vzd.gov.lv