Developments Affecting the Valuation Profession in Serbia and Proposed T ransactions Database

1. Developments Affecting the Valuation Profession in Serbia and Proposed Transactions Database Presentation at The Association of Serbian Banks by Krzysztof Grzesik FRICS REV Belgrade 26th November 2013

2. The European Union Today’s New Influence on Valuation The financial crisis has shifted Power to the EU and made the EU regulator nervous about financial and real estate markets.

3. EU Directives Relevant Valuation (and mortgage lending) Capital Requirements Directive (including definitions of market value and mortgage lending value) Mortgage Credit Directive

4. Mortgage Credit Directive (2013) • The most important and fundamental EU Law concerning real estate valuation in Europe to date • Concerns only residental property but will have major repercussions in all other sectors • A charter for reliable National Standards reflecting internationally recognised standards (IVS, EVS, RICS)

5. Mortgage Credit Directive (Cont’d) Article 14 a: Property Valuation „Member states shall ensure that reliable property valuation standards for mortgage lending purposes are developed within their territory… Recital “In order to be considered reliable, valuation standards should take into account internationally recognised valuation standards, in particular those developed by the International Valuation Standards Committee, the European Group of Valuers’ Associations or the Royal Institution of Chartered Surveyors….”

6. Mortgage Credit Directive Cont’d 1a. Member states shall require that internal andexternal appraisers conducting property valuations are professionally competent and sufficiently independent from the credit underwriting process so that they can provide impartial and objective valuations which shall be documented in a durable medium and a record of it kept by the creditor

7. Internationally Recognised Valuation Standards • International Valuation Standards 2011 - IVSC • European Valuation Standards 2012 - TEGoVA • Valuation - ProfessionalStandards 2012 - RICS • USPAP – AppraisalFoundation

8. Market Value Definition – The Common Thread “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties have acted knowledgeably, prudently and without compulsion.”

9. Reliable Property Valuation Standards for Serbia? In light of Mortgage Credit Directive and Chapter 9 EU Negotiations it seems that main responsibility rests with the National Bank of Serbia, the Banking Community and the Serbian Valuation Profession Just Published NAVS –Consultation Document setting out proposed Valuation Standards for Serbia in line with International Valuation Standards and European Valuation Standards AAS – Valuation Standards for Serbia in line with International Valuation Standards and RICS Valuation Standards

10. Serbia EU membership? Serbia is now a top candidate for EU accession having applied in 2009.   EU has opened door to negotiations on each of the 35 'chapters' that must all be closed before the Commission can recommend membership and Council and Parliament vote on it.

11. Serbia EU membership – 35 Chapters The Mortgage Credit Directive falls under chapter 9 Financial Services.

12. A „professionally competent” Valuation Profession – Educational Requirements in Europe A university degree, post graduate diploma or professional qualification relevant to real estate valuation if it prepares the valuer to carry out valuation services on the basis of a multidisciplinary knowledge that should be based on the following core areas of knowledge: a) Principles of economic theory including those relating to the real estate market b) Valuation principles, practice and standards including statutory valuations c) Real estate finance, investment and statistical analysis d) Real estate, planning and environmental law e) Principles of constitutional, contract and civil law f) Taxation of revenue, g) Principles of accounting h) Land and property rights register i) Principles of building construction j) Professional ethics

13. Proposed Transactions Database for Valuers A joint venture between The National Bank of Serbia, The Association of Serbian Banks and Established Valuer Associations Self Financing To benefit all stakeholders in the interests of greater market transparency and improved valuation accuracy

14. Types of Database Residential Property Transactions – 1st stage (to assist in valuations under Mortgage Credit Directive) Land Transactions – 2nd Stage Commercial Property Transactions – 3rd Stage

15. Database Template for Residential Transactions Location Address (street, no) Type: House, Flat/Apartment Plot specification (number) Type of ownership Number of floors of the building Construction (description) Position on floor Garage (yes/no) Area (m2) Price Price per m2 Date Purchaser (private individual/company) Seller (private individual/company/developer) Photographs, Google Map, Register Map and Zoning Plan

16. Database Template for Land Transactions Location Adress (street, no) Plot specification (number???) Type of ownership Zoning Price Price per m2 Date Seller Buyer Photographs, Google Map, Register Map, Zoning Plan

17. Commercial (office/retail/warehouse)Transactions Type of the property Location Address (street, no) Plot specification (number) Type of ownership Planning/Zoning Yield Rentable area Construction (description) Floor Areas (m2) Price Price per m2 Date Seller Buyer Photographs, Google Map, Register Map and Zoning Plan

18. Who will source information for database Banks – Members of Association of Serbian Banks Valuer Associations – Executive Summary valuations? Market Analysis Secondary Source information gained by valuers Press Information, Internet, Publicly available market reports

19. What is required? A small expert team of property analysts and IT specialists employed by Association of Serbian Banks or a separate Joint Venture Company Overseen by an Advisory/Supervisory Board made up of representatives of all stakeholders

20. Residential Property Indices Establish representative “beacon properties” to bevalued by appointed qualified experts throughout Serbia(or Valuer Associations) on a quarterly basis

21. Thank you!