Measuring Volatility in Statutory Valuation
||Measuring Volatility in Statutory Valuation
||21st Annual European Real Estate Society Conference in Bucharest, Romania
||Land and property taxes are important components of a broad-based taxation regime. These are ‘ad valorum’ taxes, imposed on the basis of property values, requiring the generation of regular, cost effective, consistent and accurate estimates of value. It is important that the general public has confidence is the mass valuation process that generates the underlying values.In New South Wales, annual Land Valuations are produced for approximately 2.5 million properties. This paper will describe the basic mass valuation model and discuss a variety of quality assurance related issues. A recent Parliamentary Inquiry into the Land Valuation System concluded that “individual property holders experience material volatility in land values”. This raises a number of questions:• What are appropriate measures of volatility for land values and a land valuation system?• Are the currently accepted and widely used standards (COD, MVP and PRD) able to identify “material” or “excessive” volatility?• If not, what standards might apply to identify “material” or “excessive” volatility?At issue here are questions of identification of outliers and whether they should be removed from analyses which are focusing on trends and standards to be applied to “typical” properties. The paper will focus on these questions using data from the NSW land valuation process over the last decade.
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||Q : Real Estate Valuation
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