REAL ESTATE VALUATION IN TURKEY: FUTURE DIRECTIONS 2016 World Bank Conference on Land And Poverty, Washington DC, March 14-18, 2016 Mehmet CETE, Turkey

 Introduction  Real Estate Valuation System in Turkey – Legal Background – Organizational Structure – Technical Aspect  Discussion – Legal – Organizational – Technical  Conclusion Real Estate Valuation in Turkey: Future Directions Overview

Introduction  A well-functioning real estate valuation system provides not only equitable taxation but also economic development of societies.  Therefore, establishment of a well-functioning real estate valuation systems is among the most important duties of the governments.  In this respect, today, many countries are trying to set up their real estate valuation systems or carrying out reform projects to improve the current ones. Real Estate Valuation in Turkey: Future Directions

Introduction  Turkey is an example of the latter.  Current legislation on real estate valuation is not appropriate in the country.  The statements about the valuation take part in different laws and regulations in a scattered and an insufficient manner.  This situation prevents to carry out real estate valuations in a standard and qualified structure throughout the country.  The lack of a leading institution to organize and supervise the valuations is also another issue that hinders realization of the valuations in a systematic way. Real Estate Valuation in Turkey: Future Directions

Introduction  Many government organizations determine real estate values for compulsory purchases through the commissions set up in their institutions.  Members of those commissions generally are not licensed appraisers. Mortgage and insurance based valuations are made by private valuation corporations.  The only organization in which valuations are carried out by licensed appraisers is the Capital Market Board of Turkey.  Municipalities determine real estate values for taxation purpose but those works are not carried out based on the reliable sales prices and real estate characteristics data. Real Estate Valuation in Turkey: Future Directions

Introduction  Current sales prices data recorded in the land registries are not real sales prices of the estates.  Non-existence of the databases required in the valuations, the difficulties experienced in getting some required data from government institutions, and outdated and/or unreliable data on real estate in the relevant institutions are some another problems of the country’s valuation system.  Therefore real estate valuation experts collect the data they need in their valuation works themselves.  As a result, there is a need for a comprehensive re-engineering in the Turkish way of real estate valuation system not only in legal but also organizational and technical means. Real Estate Valuation in Turkey: Future Directions

Legal Background  Similar to the situation in many other countries, real estate values are mainly needed for real estate taxation, mortgage, expropriation and some other public and private purposes in Turkey.  There is no a specific law and regulations on real estate valuation in the country. The statements about the valuation are scattered in different laws and regulations. Real Estate Valuation in Turkey: Future Directions

Legal Background  The main law including statements in this context is the Expropriation Law.  While this law identifies such kind of general principles about determination of real estate values for expropriation purposes, those principles are cited in some other laws for the valuations carried out for other purposes.  In addition to the Expropriation Law, Real Estate Taxation Law and Tax Procedure Law also describe taxation purpose valuation procedures Real Estate Valuation in Turkey: Future Directions

Legal Background  Turkey also have a number of regulations on real estate valuation.  Regulations about authorization and activities of companies carrying out valuations for the banks and regulations about companies performing real estate valuations based on the Capital Market Board of Turkey are two of them.  The Capital Market Board of Turkey translated International Valuation Standards into Turkish language as well.  Those standards are legally binding for the real estate valuation experts in the valuations carried out for the Board. Real Estate Valuation in Turkey: Future Directions

Organizational Structure  There is no a leading institution to organize and supervise real estate valuations in Turkey.  When they need to know values of real estate, public authorities estimate the values with the commissions of which members are personnel of that institution.  Those personnel are not licensed experts of real estate valuation but they have experience in the valuation. Real Estate Valuation in Turkey: Future Directions

Organizational Structure  While such types of valuations are carried out generally for expropriation, easement or sale, the valuations for taxation are made by the commissions which are composed of the mayor, a technical personnel from the municipality, two officers from taxation office, director of the land registry office, an official from the chamber of commerce and head of the neighborhood.  Capital Market Board of Turkey is another public organization carrying out real estate valuations in the country.  The Board differs from other public organizations because all valuations are made by licensed valuation experts for the Board. Those experts have to obey the international valuation standards during their valuation works. Real Estate Valuation in Turkey: Future Directions

Organizational Structure  Exams for licensing the appraisers are also done by the Capital Market Board of Turkey.  Anybody having bachelor’s degree can enter the exams and get a license if he or she gets success in the exam and has at least 3 years’ experience in the field of real estate valuation.  The Union of Real Estate Valuation Experts was founded in 2009 in the country.  Members of the Union are the licensed experts of real estate valuation and their corporations. The main mission of the Union is to improve the valuation profession and activities in the country. Real Estate Valuation in Turkey: Future Directions

Technical Aspect  One of the most important components of real estate valuation is data, namely real estate characteristics and sales prices data.  Since there is no common databases available for those data, real estate appraisers try to collect them from different authorities or with field works during the valuations in Turkey. Real Estate Valuation in Turkey: Future Directions

Technical Aspect  Quality problems in some data is the biggest issue in this data collection.  For example, sales prices recorded in the land registry are declared by the buyers and sellers in the country but those prices are lower than real market prices.  Therefore, appraisers need to search real market prices from real estate agents, buyers/sellers, real estate websites, and so on.  Accessibility problems experienced by the appraisers for some data is another issue in the data collection.  Getting qualified data especially from land registry offices may not be easy for the experts. Real Estate Valuation in Turkey: Future Directions

Technical Aspect  Mass appraisal methods are not used in the valuations in Turkey.  Instead, unit prices of real estate are estimated by the commissions based on the streets.  Because the estimations are not made with sufficient market analysis data in these valuations, the resulting values are not accurate enough.  In order to solve this problem, two pilot projects of mass appraisal have been made by the General Directorate of Land Registry and Cadastre in recent years in the country and some valuable results have been obtained. Real Estate Valuation in Turkey: Future Directions

Discussion  Lack of a holistic law about the real estate valuation leads to some problems in the valuation works in Turkey.  Therefore there is need for enactment of a specific law on real estate valuation.  This law should define general principles of the valuation, responsible authorities, and ethical rules etc.  It should also be supported by regulations and guidelines to explain the statements in the law and provide a standard for the valuations throughout the country. Real Estate Valuation in Turkey: Future Directions

Discussion  Real estate valuations for all purposes should be made by the licensed experts of valuation.  Therefore there is need for capacity building in short period of time in the Turkish real estate valuation system.  However, the licensed experts should have bachelor’s degree from real estate related disciplines like surveying engineering, civil engineering, city and regional planning, architects or agricultural engineer. Real Estate Valuation in Turkey: Future Directions

Discussion  Without a leading institution, it is not easy to set up and maintain a well- functioning real estate valuation system in Turkey.  It means, there is need for establishment of a leading authority for real estate valuation under the land administration organization.  This authority can be structured as the General Directorate of Real Estate Valuation.  All valuation works should be done by the licensed experts and the General Directorate should organize and supervise the valuation works throughout the country. Real Estate Valuation in Turkey: Future Directions

Discussion  In order to solve the issues experienced in valuations of real estate, building and sustaining real estate characteristics and sales prices databases can also be organized by the leading institution.  There is need for development of innovative solutions to provide declarations of buyers and sellers the real sales prices.  Decrease of the current rates for taxes and fees collected in the transactions (4%) can be considered as a potential solution.  In order to improve quality of the current land registry and cadastre data and to increase accessibility of the land administration data, new projects should be developed. Real Estate Valuation in Turkey: Future Directions

Discussion  Inclusion of the data needed in the valuations into the NSDI and determination of the organizations responsible from production and maintenance of the data components should be done to provide effectiveness of the system.  Mass appraisal techniques make the valuation processes faster and easier especially for taxation purposes.  Turkey should increase number of the mass appraisal projects and develop appropriate models for its different regions, cities or even neighborhoods. Real Estate Valuation in Turkey: Future Directions

Conclusion  Preparation of a special law, regulations and guidelines for domain.  Establishment of a public authority under the land administration organization both to organize and supervise valuation works in the whole country.  Developing projects to improve data quality in the land registry and cadastre and to increase accessibility of the land administration data.  Giving special attention to capacity building in real estate valuation domain in the country.  Increasing both qualities and quantities of the valuation corporations. Real Estate Valuation in Turkey: Future Directions

Conclusion  Setting up real estate characteristics and sales prices databases required in the valuations and developing mechanisms to maintain the databases.  Inclusion of the data needed in the valuations into the National (Spatial) Data Infrastructures.  Determination of the organizations responsible from production and maintenance of the data components.  Preparation of infrastructures for mass appraisals and developing special models of the mass valuations. Real Estate Valuation in Turkey: Future Directions

Thank you.. Mehmet CETE, Ph.D. Department of Geomatics Engineering Faculty of Engineering and Architecture Izmir Katip Celebi University Izmir, TURKEY