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Automated Valuation Models for Mass Valuation Purpose in Latvia

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Title: 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.

16
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.

33
Thank You for attention!
  • Questions please!
  • Martins Lazdovskis
  • martins.lazdovskis_at_vzd.gov.lv
  • nivd_at_vzd.gov.lv
  • www.vzd.gov.lv
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