The use of AVM’s in the Netherlands: Netherlands Council for Real Estate Assessment The use of AVM’s in the Netherlands: How we benefit from the advantages Baltic Valuation Conference 25 May 2017 Ruud M. Kathmann

Baltic Valuation Conference Netherlands Council for Real Estate Assessment The Netherlands (1) 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment The Netherlands (2) The Netherlands 12 provinces 388 municipalities 22 polderboards 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment The Netherlands (3) Some other facts: 17.1 million inhabitants Area: 41,543 km² (16,040 square miles) 8.7 million residential and non-residential properties Total value: € 1,650 billion More than € 10 billion tax revenues based on the assessed value Total costs for appraisal and assessment: € 150 million 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Property Taxation 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Property taxation in the Netherlands (1) Different real estate taxes are based on the same valuation Municipal real estate tax Real estate tax polderboards polderboards take care of “dry feet” State taxes: Imputed income for owner occupied houses (Income tax) Landlord tax for rented houses Limits fiscal depreciation of real estate (Corporation tax) Inheritance tax 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Property taxation in the Netherlands (2) Municipal real estate tax: for residential property: only owner pays taxes tax rate (average) 0.2% of value tax for average house € 500 for non-residential property: both owner and occupier taxed tax rate (average) 0.3% + 0.2 % exemptions: agricultural land, public roads, churches, nature 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Property taxation in the Netherlands (3) Waterboards / polderboards only for owner only for built property land is taxed based on area tax rate (average) 0.05% of value tax for average house € 125 100% of financial means from taxation 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Property taxation in the Netherlands (4) Central government: Income tax (imputed income of house) 0.60% of value is added to your income tax for average house € 700 Landlord tax (owner rent out >10 houses) 0.536% of value tax for average house € 1000 Corporation tax depreciation can be deducted from profit but no deduction beyond 100% or 50% of value Inheritance tax for houses the assessed value is used rates from 10% (children etc.) to 40 % 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Property taxation in the Netherlands (1) Average Tax Bill Value Tax Tax rate Tax bill € 250,000 Municipal real estate tax 0.2% € 500 Real estate tax Polderboard 0.05% € 125 Income tax (imputed income owner-occupied house) 0.60%*0.42% € 630 Total tax bill € 1,255 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment About The Netherlands Council for Real Estate Assessment (in Dutch: Waarderingskamer) 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment The Netherlands Council for Real Estate Assessment Main task: quality control of mass valuation Involved parties municipalities (388) polderboards (23) national revenue office Council board has 11 members Staff 20 persons Minister of Finance is responsible 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment The Netherlands Council for Real Estate Assessment Set out guidelines administration valuation quality control procedures Perform audits Publish results Advisor to the Minister of Finance 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Valuation for governmental use in the Netherlands 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Valuation in The Netherlands (1) International Valuation Standards (EVS/IVS) Market value The estimated amount for which a property should exchange on the date of valuation between and willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeable, prudently, and without compulsion Mass appraisal IAAO standards 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Valuation in The Netherlands (2) 8.6 million properties valued annually Done by municipality re-assessment: once every four year now annually or by shared service centres or private firms Computer assisted mass appraisal (CAMA) different types of models availability of market data type of property and comparability of property to estimate market value and make value report 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Valuation in The Netherlands (3) Residential property Market Value based on comparable sales Different models are used, generally: (statistical) clusters calculating models (sometimes using MRA) All models distinguish at least: Building itself Plot Annexes and outbuildings 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Valuation in The Netherlands (4) Non-residential property: Offices, retail and other commercial real estate: market value based on the comparison of rental prices and capitalisation factor (gross yield) or market value based on DCF method Schools, hospitals, railway stations, etc.: market value or, when higher, reproduction costs (ground + building) reproduction cost corrected for technical and functional obsolescence 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Benefits of computer assisted mass appraisal (1) Cost efficiency: Annually 8.6 million valuations are performed At a total cost of €150,000,000.- (€17,- for each property) 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Benefits of computer assisted mass appraisal (2) Due to an increase in quality, the value is more and more accepted (annually 1-3% appeals) Starting as a pure “tax” value, the assessed value is nowadays used much more broadly: Income- and inheritance tax Fraud control Maximum allowed rent Mortgage lending (90% LTV) 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Benefits of computer assisted mass appraisal (3) Equitability: Similar properties are valued equally Differences in characteristics are taken into account Transparancy: Can be less of a ‘black box’ than the valuers mind 25-5-2017 Baltic Valuation Conference

Baltic Valuation Conference Netherlands Council for Real Estate Assessment Conclusion Without AVM’s the annual assessment of all properties would not be possible The results of the AVM’s are well accepted by taxpayers and other stakeholders 25-5-2017 Baltic Valuation Conference