Valuers from international advisory firm JLL have prepared a series of expert articles – “Valuers’ Views” - regarding the most prominent topics related to the valuation of commercial real estate.
Małgorzata Żółtowska, Head of Valuation Department CEE at JLL, who has also recently been appointed as Chief Operating Officer at JLL CEE, says: “Very often we come across enquiries from clients – banks, funds, developers – about the valuation of commercial real estate. In our series of expert articles, we will discuss new legislation, write about the valuation of different kinds of properties including land, residential and hotel as well as the topic of bank valuation quality. In the first article, Krzysztof Jarocki writes about HypZert qualification and new European regulations regarding valuation standards.”
Valuers’ Views, part 1
HypZert qualification and new European regulation concerning valuation standards
Author: Krzysztof Jarocki, MRICS - National Director, Valuations Department at JLL
The annual international conference organized by German HypZert GmbH was recently held in Frankfurt. The organization provides certification for real estate appraisers including experts specializing in Mortgage Lending Value (MLV). Over 1,200 specialists from around the world including Germany, the Netherlands, France, Great Britain and Poland took part in the event.
The conference’s delegates mainly discussed the new regulations that are currently being worked on by the European Banking Authority (EBA). EBA is an independent EU Authority which aim is to ensure an effective and consistent level of prudential regulation and supervision across the European banking sector. Currently, EBA is preparing what is called the technical standard to specify the rigorous criteria for the assessment of the Mortgage Lending Value. The document is particularly awaited by the German market which is the most active in terms of utilizing such type of values for securing lending. Legal and technical standards for an assessment of Mortgage Lending Value have been functioning on this market for a long time, so it comes as no surprise that such interest is being shown in the content of the new technical standard. It is expected that the standard will derive much from the previous practices on the German market, although details on this matter are not known yet. The project’s publication is scheduled for the end of this year.
Furthermore, participants of the conference discussed the regulation of the European Parliament and EU Council on prudential requirements for credit institutions and investment firms (Capital Requirements Regulation - CRR). The CRR regulation is legally binding in its entirety and has been in force in all EU-member states since 1 January 2014 (excluding specific provisions). The aim of the regulations is to improve the oversight of the banking sector and investment institutions. They are the next step towards creating a more secure and transparent financial system. The CRR regulation comprises provisions regarding banks’ self-funds, capital requirements, financial liquidity and leverage as well as other aspects of the sector. CRR imposed on EBA the requirement to create a technical standard regarding the abovementioned Mortgage Lending Value.
During the conference, participants also touched upon other topics including comparing the mortgage regulations in several European countries, practical aspects of real estate valuation as well as the influence of green certifications. Furthermore, it was a perfect opportunity to network with other experts from banking and property valuation. This year's event was very well-organized and we hope that next year's conference, the 20th anniversary edition, to be held in Bonn, will be as equally successful.
CIS HypZert MLV certification confirms a competence and expertise of appraisers specializing in MLV assessment. It is provided to valuers practising outside Germany. HypZert certification has only recently been opened to external markets. It is a result of the pro-activeness of German banks operating outside their country as well as their expectations towards appraisers acknowledged to have MLV expertise on external markets. The recipients of these evaluations are mainly Pfandbrief banks issuing secure cover bonds. Rigorous requirements regarding the quality of real estate suitable for security of cover bonds as well as prudent regulations for their MLV assessment translate into a very strong security of such cover bonds. This is further reflected in low interest rates of such bonds which on some markets are even below the government bonds' rates.
CIS HypZert MLV certification complies with the requirements of the international ISO/IEC 17024 norm and guarantees the highest quality of property Mortgage Lending Value assessment. Candidates for valuers must have several years of professional experience, appropriate education and relevant competence as well as specialist knowledge regarding valuation, banking and finance. Currently there are around 55 appraisers outside Germany with CIS HypZert MLV certification including only few in Poland.
We are observing an increase in interest in Mortgage Lending Value services in Poland and CEE at the moment. In response to this trend, the Valuation Department at JLL Poland has been providing independent MLV services in the abovementioned region since the second half of 2014. All valuations are provided by a certified CIS HypZert MLV expert.
JLL Poland annually conducts ca 800 valuations of both single properties and property portfolios. Valuations are conducted mainly for banks, investment funds, developers and private investors. The total volume of properties valued by JLL Poland in 2014 exceeded PLN 85 billion.
Krzysztof Jarocki has over 12 years' experience on the real estate market in Poland. In JLL, he is responsible for cooperating with the banking sector, the coordination of portfolio assets valuation as well as daily management and property valuations. Krzysztof has a strong competence especially in the valuation of retail and office properties as well as development land. He is a member of the Royal Institution of Chartered Surveyors (RICS) as well as a qualified Polish Valuer. In 2014 he has been certified as a CIS HypZert MLV - HypZert Real Estate Valuer for Mortgage Lending Valuation. He graduated from Geodesy and Property Valuation at the University of Warmia and Mazury in Olsztyn as well as post-graduate studies in Property Valuation and Management at Sheffield Hallam University in UK.