AUTOMATED VALUATION MODELS OF REAL STATE FOR CADASTRAL PURPOSES
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AUTOMATED VALUATION MODELS OF REAL STATE FOR CADASTRAL PURPOSES. Reform of the Italian cadastral valuation system: regulations, analysis and testing. Santiago de Compostela, October 20 th 2006. Reasons for the reform process. SYSTEM OUTDATE AND STATIC. LOW QUALITY OF VALUATIONS.

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Automated valuation models of real state for cadastral purposes

AUTOMATED VALUATION MODELS OF REAL STATE FOR CADASTRAL PURPOSES

Reform of the Italian cadastral valuation system:

regulations, analysis and testing

Santiago de Compostela, October 20th 2006

Antonio de Santis - Santiago de Compostela

October 2006


Reasons for the reform process

Reasons for the reform process

SYSTEM

OUTDATE AND STATIC

LOW QUALITY OF VALUATIONS

INEQUALITY OF REAL ESTATE TAXATION SYSTEM

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

EQUITY OF REAL ESTATE TAXATION

TRASPARENCY

LAND PLANNING AND MANAGMENT

DYNAMISM

TRASPARENCY OF REAL ESTATE MARKET

EFFICIENCY

The new valuation system: requirements

OBJECTIVE

GENERAL PURPOSES

SPECIFIC PURPOSES

CREATION OF A NEW CADASTRAL VALUATION SYSTEM

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

The new valuation system: structure

SUB-SYSTEMS

DISTINCTIVE ELEMENTS

BUILDING AND REAL ESTATE UNIT CHARACTERS

BUILDINGS

RURAL LANDS

POSITIONAL CHARACTERS

TECHNICAL AND PRODUCTIVE CHARACTERS

BUILDING LOTS

BUILDING CAPACITY

THREE SUBSYSTEMS TO DEVELOP AND IMPROVE,

STARTING FROM THE BUILDINGS CADASTRE

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

The new valuation system: requirements

Sub-systems

THE

VALUATION

SYSTEM

RURAL

LANDS

BUILDING

LOTS

BUILDINGS

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

FROM THE USE OF COMPUTERIZED AND ON-LINE ADVANCED TOOLS

AND A SHARED

LAND INFORMATION SYSTEM

FROM THE EXPERIENCES ALREADY CARRIED OUT IN OTHER COUNTRIES

FROM THE DEVELOPMENT OF THE BRANCHES OF VALUATION

The new valuation system: informing principles

THE REFORM PROJECT SEIZES AND EXPLOITS THE OPPORTUNITIES CURRENTLY OFFERED AT LEVEL:

NATIONAL

INTERNATIONAL

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

REFORM (not review)

STRUCTURE OF THE SYSTEM ADAPTABLE AND BASED ON VALUES AND INCOMES

VALUES

INCOMES

INNOVATIVE METHODS DIFFERENT DIVERSIFIED FOR EACH ANALIZED SUBSYSTEM AND BASED ON MATHEMATICAL/STATISTICAL MODELS

CAP RATE

The new valuation system: primary legislative choices

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Market Comparison Approach

Short number of market data

Impossibility to create an

appropriate statistical sample

Financial procedures

Inadequate real estate transfer data

Availability of adequate rent data, in case of dynamic rent market

Real estate reconstruction value

(net … value)

Inadequate real estate

sale and rent data

Availability of price data for the areas

Innovative valuation procedures: possible approaches

ENFORCEABLE

VALUATION PROCEDURE

MARKET CONDITION

Econometric procedures

(regression models, etc.)

Large number of market data

possibility to create an

appropriate statistical sample

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Preliminary check: enforceability

Critical case linked to the market short dynamis, that requires the use of alternative valuation procedures

50 millions (nearly)

units

(Millions)

1,5 millions (nearly)

~ 40

Real estate groups

6

BARRACKS

BOARDING SCHOOL

MUSEUM, SCHOOL

RESIDENTIAL OFFICE

SHOP WAREHAUSE

BOX LABORATORY

INDUSTRY

CINEMA

Areas

AREAS IN WHICH THE USE OF ALTERNATIVE VALUATION PROCEDURES IS PREVALENT (DEPRECIATED RECONTRUCTION VALUE AND/OR VALUE BASED ON CAPITALIZATION OF INCOME)

AREAS OF POSSIBLE USE OF ECONOMETRIC PROCEDURES (STATISTICAL REGRESSION MODELS, ….)

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

TESTING

IN ORDER

TO VERIFY

Testing objectives

ENFORCEABILITY

COVERAGE

QUALITY/COSTS

TIME

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Conceptual model: residential

Positional characters of zone

Positional characters

of the neighbourhood

Technical characters of the building

Technical characters of the unit

Municipality

zone

Civil building

B

M

+20%

1,5-1,6

A

+10%

Valore medio

1,6-2

General model of function for real estate valuation

V=

x

x

x

x

Average value

zone coef.

Neighbour. coef.

Building coef.

Unit coef.

A

B

C

D

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

POSITIONAL CHARACTERS

OF ZONE

A

POSITIONAL CHARACTERS

OF THE NEIGHBOURHOOD

B

TECHNICAL

CHARACTERS

OF THE BUILDING

C

TECHNICAL

CHARACTERS

OF THE UNIT

D

Parametri tecnici

  • Town centre, valuable zone, …

    (with reference to the municipality)

  • relative position in the zone, specific characters of the neighbourhood

  • Historical or modern building

  • Building maintenance

  • Building typology

  • Structural typology

  • Building equipment

  • Building trimmings

  • Size of common portions

Groups of characters

IMPORTANT TECHNICAL PARAMETERS

  • Class of area

  • Level (with or without lift)

  • Predominant overlooking

  • Rationality of rooms distribution in the unit

  • Trimmings and equipment (if different from the building)

  • Unit state (if different from the building)

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Optimization of quality / costs ratio

Vi = ƒ (A;B;C;D)

Approximate representation of the optimisation area about

the relationship between the number of functions and the number of parameters

Number of

processed

functions

Number of analysed parameters

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Optimization of quality / costs ratio

Costs

(C)

CONFIRMATIONS FROM THE TESTING ACTIVITY

Positional characters of the buildings neighbourhood

Technical characters of the units

Positional zone characters

Quality of the Evaluation(Q)

(BESIDES THE AREA AND AVAILABLE OTHER-ONES) THE USE OF ADDICTIONAL TECHNICAL DATA, WHICH DESCRIBE THE UNIT, GENERATES A CONSIDERABLE INCREASE OF COSTS. THIS INCREASE IS NOT PROPORZIONATE TO THE IMPROVEMENT OF THE QUALITY OF THE EVALUATION.

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Belluno

Pordenone

Aosta

Milano

Novara

Torino

Bologna

Genova

Firenze

Ancona

Terni

L'Aquila

Campobasso

Roma

Napoli

Taranto

Potenza

Cagliari

Catanzaro

Siracusa

The testing activity about the building sub - system

The geographical areas of the testing activity

20

PROVINCIES

40 MUNICIPALITIES

100

ZONES

10.000

BUILDINGS

100.000

IMMOVABLE UNITS

FOR EACH GEOPRAPHICAL AREA OF THE TESTING ACTIVITY THERE IS A LOCAL WORKING TEAM. ALL THE LOCAL TEAMS ARE

COORDINATED BY A TASK-FORCE AT CENTRAL LEVEL

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

T7

100%

SPECIAL

T2

9%

9%

9%

T1

80%

3%

52%

R1

60%

23%

R4

ORDINARY

91%

40%

3%

R2

20%

0

Asset

The analysed real estate asset

The whole real estate asset

R1/R2 = RESIDENZIAL O MIXED UNITS

R4= GARAGES

T1= SHOPS

T2= WAREHOUSES

T7= OFFICES

THE TESTING ACTIVITY HAS BEEN EXTENDED ON CATEGORIES (GROUPS), WHICH REPRESENT THE 91% OF THE WHOLE REAL ESTATE ASSET

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

The workflow of the supposed process

CADASTRAL

CATEGORIES

TYPOLOGIC

FUNCTIONAL

SEGMENTS

GEOGRAPHIC

SEGMENTS

ZONES

TECHNICAL

PARAMETERS

VALUES

Market Values

In each zone determination of the driver parameters: neighbourhood

characters, building and urban real estate units characters

CAP-RATE

INCOMES

INNOVATIVE EVALUATION PROCEDURES

Ordinary Incomes

Determination of value/income through standardized and computerized procedures with the support of mathematical-statistical techniques

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Geographical subdivision

Subdivision of the Municipal circumscription in homogeneous areas (zones)

8

2

3

4O

PARAMETRIC SCALE OF THE POSITIONAL FACTOR

( zone factor  ambit factor)

7O

75

4

60

100

40

5O

5

100

85

A ± B

7

7O

ZONES

1

6

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Statistical and mathematical procedures

The evaluation function, which is checked for each tyological-functional group

V= b0 *1 * x2 * x 3 * x 4 *………………………. * xn-2 * xn-1 * xn

CU =

xF+1……….xU

CB =

xI+1………..xF

CZ = X1………....XM

CN = XM+1………...XI

A

B

C

D

The first testing activities involved from 10 to 15 parameters

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Segmentazione funzionale - tipologica

  • Real estate units in buildings for residential use and for mixed destinations

  • Real estate units included in villas and cottages

  • Typical real estate units of a place or region

  • Sheltered parking places, not sheltered parking places in private areas, boxes

Residential

  • Shops and similar real estate units

  • Sheds, warehouses, workshops and similar real estate units

  • Buildings and other real estate units for sport activities

  • Guesthouses

  • multi-storey car park, car park in specific areas or in buildings, for public use

Commercial

BUILDINGS

  • Offices, work-rooms and similar real estate units

Offices

  • Real estate units for productive activities

  • Real estate units for productive activities related to Agriculture

  • Real estate unit for mixed commercial activities and service industry activities

  • Real estate units for mixed service industry and office districts activities

Productive

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

More appropriate function,

on the basis of the tests

Innovative valuation procedures: the regression

MULTIPARAMETERS REGRESSION

  • MAKES IT POSSIBLE TO CALCULATE THE REAL ESTATE VALUE V (dependent variable) IN RELATION WITH THE TECHNICAL CHARACTERS xi, HAVING i=1,2,…,n (independent variables), WITH DIFFERENT RELATIONS:

V= c0 + m1* Y1+ …+ mn* Yn

Linear

Exponential in the variables

V= b0 * b1y1 * b2y2 * … * bnyn

Exponential in the coefficients

V= b0 * y1 b1 * y2 b2* ….. * ynbn

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

The testing activity: quality of results

  • The statistical sampling has involved about 100 zones, which are composed by 10.000 buildings, which characteristics have been surveyed.

  • Results has been extended to 100.000 real estate units.

10%

8%

8%

8

7%

6%

% of buildings,

which Error is higher than 20%

6

4

2

0

R1-Res. Units

T1-Shops

R4-Garages

T7-Offices

Max error means

27%

23%

23%

24%

Buildings with a percentage error higher than the “acceptable level” (20%) are less than 10%. However the average error is lower than 30%.

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Verification of the model: results for the segment R1- residential

Total buildings of the analysed samples = 1.792 that statistically represent 1/30 of 53.460 buildings in the D.B. and 268.800 units (1/150)

Analysed buildings

66%

100%

100%

80

60

40

26%

20

8%

0

Error>20%

Error between

Error <10%

Total buildings

20% and 10%

Average

maximumerrors

27%

14%

5%

Less than 10% of the buildings shows an error above 20%, with an average maximum error of 27%

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

35%

Zone

appreciation

Verification of the model: results for the segment R1- residential

Frequency

100%

85%

80%

80%

80

60

45%

40

30%

20

10%

0

Building

Historical or

Construction

Other

Neighbourhood

Maintenance

typology

modern period

typology

  • On average the regressions use 4 parameters (3 related to the building + 1 related to the neighbourhood)

  • In 35% of cases the parameter “zone appreciation” was used, too,

  • in aggregation cases

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Technical characters of the building

Civil building

40 - 50

1,5-1,6

1,6-2

Innovative evaluation procedures: quality-costs relation

100

100

D

C

B

A

80/85

Positional zone characters

Positional characters of the neighbourhood

Quality

Technical characters of the unit

65

MUNICIPALITY

ZONE

50

B

M

+20%

A

20 - 25

+10%

Average value

Costs

10 - 15

Q/C

3,3 – 5,0

2,5 – 3,2

1,8 – 2,0

0,15

Quality average indicators in relation with the typologies and the number of the used technical parameters

Costs average indicators in relation with the typologies and the number of the surveyed technical parameters (on the spot, especially for the C and D characters)

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

The model – simplified methodology

NEIGHBOURHOOD

BUILDING

ORDINARY I.U.

Civil building

+

I.U. ordinary for size and floor level

-

The methodology determined for ordinary units and buildings makes it possible to reduce the number of evaluation functions to be elaborated and buildings to be surveyed, as well as to limit the survey to the neighbourhood and building parameters

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Mathematical - statistical procedures

The evaluation function under examination

V= b0 *1 * x2 * x 3 * x 4 *………………………. * xn-2 * xn-1 * xn

CU =

xF+1……….xU

CB =

xI+1………..xF

CZ = X1………....XM

CN = XM+1………...XI

A

B

C

D

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Innovative evaluation procedures: ordinary units

STANDARD BUILDING

(with regression)

BUILDING

STANDARD CHARACTERS OF THE UNIT

IMMOVABLE UNIT

FLOOR LEVEL

AREA CLASS

Standard characters

IMMOVABLE UNIT

A great part of the real estate can be evaluated through standard regressive procedures

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

BUILDING ADJUSTMENT CHARACTERS

UNIT ADJUSTMENT CHARACTERS

NET INTERNAL HEIGHT

PREVAILING EXPOSURE

… …

Innovative evaluation procedures: not ordinary units (special)

STANDARD BUILDING (with regression)

BUILDING

STANDARD CHARACTERS OF THE UNIT

IMMOVABLE UNIT

AREA CLASS

FLOOR LEVEL

IMMOVABLE UNIT

Standard characters

Non-standard characters

The residual real estate can be evaluated through specific adjustment coefficients at building and unit level

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Unitary market price (Euro/sq)

Surveyedcap-rate

CAP-RATE

Calculated cap-rate

Unitary rental income (Euro/(sq month)

From a value basis to a rental one

Currency / cap-rate

Location

CENTRE SUBURBS

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Correspondence of the new system with the purposesand requirements

  • CHECK OF THE SYSTEM CORRESPONDENCE WITH REQUIREMENTS OF:

FISCAL EQUITY

SIMPLICITY AND TRANSPARENCY

EFFICIENCY AND DYNAMISM

PROGRESSIVE IMPROVEMENT

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Aosta

Pordenone

Milano

Torino

Genova

Firenze

Spoleto

Campobasso

Roma

Increase >300%

Sorrento

250%< increase < 300%

Napoli

Potenza

200%< increase < 250%

Ca

Selargius

150%< increase < 200%

100%< increase < 150%

increase < 100%

to be verified

Check of the model – Results Extension Segment R1

FISCAL EQUITY

The current relevant inequalities in the system in force would be overcome, through the correlation of the new values with the market values, with an allowance of 20%, normal for mass valuations.

VALUE INCREASE COMPARED WITH THE CURRENT ONE

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Correspondence of the new system with the purposesand requirements

EASINESS AND TRASPARENCY

Vu = b0 * y1 b1 * y2 b2* ….. * ynbn

where Ci = yi bi

Vu = (preference price for sm) * C1 * C2* ….. * Cn

VTOT = Vu* area

C1, C2,……., Cn are coefficients that qualify the importance of the characters identified for that specific real estate unit

(positional characters, building characters, unit characters)

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Correspondence of the new system with the purposesand requirements

BESIDES FOR THE SYSTEM DYNAMISM

EFFICIENCY

(effectiveness)

ZONE

FOCUS ON BUILDING

USE OF THE UNIT TECHNICAL CHARACTERS AVAILABLE IN THE CADASTRAL DATA BASE

SIMPLIFICATION

(CARRIED OUT)

UNIFICATION OF CHARACTERS

COSTS

REDUCTION

PROGRESSIVENESS

The identified methodology for the ordinary real estate units allows to reduce the number of valuation functions to be elaborated, and the number of building to be surveyed, as well as restrict the survey of the positional characters of the neighbourhood and the technical characters of the building, with important reduction of the implementation costs

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Correspondence of the new system with the purposesand requirements

DYNAMISM

(perfecting)

PROGRESSIVE IMPROVEMENT

MUNICIPALITY

ZONE

Civil building

B

M

+20%

1,5-1,6

A

+10%

Agerage value

1,6-2

Positional characters of zone

Positional characters of the neighbourhood

Technical characters of the building

Techncial characters of the unit

New buildings and changes of builbing characters owing to a private intervention

UPDATING THROUGH OWNER DECLARATION/STATEMENT

Changes of the reference values prevalently owing to a public intervention

UPDATING EX OFFICIO

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

CREATION

CREATION

Urban and rural territory

Real Estate market observatory

Economic data

NEW

METHODOLOGIES

New cadastral values

Cadastral

data base

Technical data

INTEGRATED LAND INFORMATION SYSTEMS

The quality of the new system depends on the number and quality of information related both to the unit than to the local market performance

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

The supposed system updating schedule

GENERAL

REVIEW

GENERAL

REVIEW

INTERIM

UPDATING

(PARTIAL REVIEW)

Cadastral

Values

Years

2 – 4

years

2 – 4

years

2 – 4

years

8 -10 years

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Actors and roles in the reform process

Actors and roles

MUNICIPALITIES

COMMITTEES

FOR TAXABLE REAL ESTATE

AGENZIA DEL TERRITORIO

DEFINITION OF RULES AND METHODS FOR IMPLEMENTATION

OPERATING PLAN

VALUATIONS APPROVAL AND EQUALIZATION

ZONE DETERMINING

(BOUDARIES AND STARTING VALUES)

ZONE DETERMINING (BOUNDARIES AND RUNNING VALUES)

FIRST LEVEL OF THE FISCAL CASES

DETERMINATION OF VALUATION FUNCTIONS

PRELIMINARY PHASES SUPPORT

DATA BASE AND L.I.S. CREATION (IN COOPERATION WITH LOCAL AUTHORITIES)

OPERATING PHASES FOR THE PROCESS

EXTENSION

L.I.S MANAGMENT

AND UPDATING

ACTIVITY COORDINATION

PROCESSES QUALITY AND UNIFORMITY

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Final messages

TECHNICAL-POLITICAL CHOICE OF THE

FUNDAMENTAL PRINCIPLES AND LINES

IN-DEPT VERIFY OF TECHNICAL AND ECONOMIC FEASIBILITY OF THE ADOPTED METHODOLOGICAL METHODS

IDENTIFICATION OF AN ADEQUATE LEVEL OF QUALITY WITH SELF-IMPROVEMENT PROCESSES DURING THE OPERATION

MESSAGES

TECHNICAL DATA

(INTEGRATION AND QUALITY IMPROVEMENT)

ECONOMIC DATA (SURVEY, INTEGRATION, AND QUALITY IMPROVEMENT)

IDENTIFICATION OF THE COOPERATION MODES BETWEEN CADASTRAL AGENCY AND LOCAL AUTHORITIES IN ORDER TO PERFORM AN EFFICIENT LAND ADMINISTRATION

Antonio de Santis - Santiago de Compostela

October 2006


Automated valuation models of real state for cadastral purposes

Thank you

for your kind attention

Antonio de Santis

Agenzia del Territorio

Central Director

for the Technical Development and the International Relations

Antonio de Santis - Santiago de Compostela

October 2006


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