Real Estate Valuation

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Why to have official information systems on real estate values?

Transparency of the real estate market, covering the whole territory, is a basic necessity not only for a country, but also for its citizens as well as for companies and interested investors. A stable, transparent real estate market is a necessary precondition for the economic development and stability of any country. Potential investors are only ready to invest if there are sufficient realistic, precise, comparable data on the market value of real estate objects, preferably covering the whole territory. The financial crisis that originated in the United States of America in 2007 and 2008 is above all a consequence of a lack of reliable information on real market values for real estate objects when giving bank loans.

The actual situation in Serbia

There is still a lack of transparency and stability on the Serbian real estate market. Municipalities, governmental authorities, and the courts don’t have common national standards for the valuation of properties and don’t count with reliable data on property values. Both are an essential basis for municipal planning, since reliable data would allow greater efficiency and equity for the collection of land-based taxes, the determination of compensatory payments for the privatization of former state-owned land or for the transition of land use rights to land ownership. In accordance with the provisions of the law on State Land Surveying and Cadastre of 2009, the National Geodetic Authority RGZ has started to develop a database on purchase prices for real estate. However, it’s completion will probably still take several years. Therefore, various local authorities currently maintain their own databases, based on secondary data.

Pilot projects on local level in Serbia

In three pilot projects in the cities of Subotica, Zrenjanin and Valjevo, the project “Strengthening of local land management in Serbia” has developed a local GIS application that, based on a purchase price collection, calculates average purchase prices for different types of real estate. These values can be visualized in maps by a web-based GIS application of the municipalities. This application is a valuable support for municipalities, in particular in the field of construction and planning and for the establishment of land-based taxes.

Information System Real estate values

Screenshots GIS Subotica Screenshots of the elaborated GIS based information system on real estate values

Regarding the development of a national valuation system, the following key messages can be drawn from this first pilot phase:

• It is possible and useful for the municipalities to generate and manage information systems on local real estate data.
• The parallel development and maintenance of similar data collections is inefficient and prevents the standardization of real estate valuation.
• The raw data from purchase contracts often do not correspond to market values. They need to be verified by experts before entering them into the database. Only local experts have the necessary knowledge of the local real estate market to fulfil this task.
• The definition of equivalent areas for the visualization of average values should be done by local experts.

The establishment of an official real estate valuation system for Serbia

In 2013, the Institute of Civil Engineering of the University of Belgrade has developed a detailed study on the current situation of the valuation system in Serbia. The study includes a proposal for its optimization and further development. The study is available for download on our website (here).
Based on the study and on the findings of the pilot projects on local level, the second phase, aiming at the establishment of an official real estate valuation system for Serbia has been started. The main goal is to speed up the process of data collection for the central database, to improve the data quality and thus to provide more market transparency. A working group with representatives from municipalities, tax authorities, the RGZ, the Institute of Civil Engineering of the University of Belgrade and other participants has been established, in order to develop and test the usage of the central real estate database of the RGZ for all local concerns, using particular web services. Based on this, local committees of experts should be responsible for the input of the data from purchase contracts into the database, as well as for the qualification and analysis of the data.

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