Research of international practices in determining long-term value or prudent value of real estate

Abstract

Among the current challenges of the valuation profession are a number of new topics, but the main ones remain the introduction of ESG (Environmental, Social and Governance) factors in valuation and the concept of prudent value. The prudent value is not yet mandatory, but this concept will be implemented with the updated version of the Regulation on capital requirements no. 575/2013 of the European Union (EU). The paper contains the research of international practice regarding the prudent valuation of assets or long-term value and how they are implemented in practice, as well as how we implement the provisions of Basel III (common rules for the assessment and management of various types of risks associated with the financial field). By aligning with Basel III, there will also be a harmonization of the understanding on the value of real estate and loans that have as their object the financing of real estate, creating a fair and comparable basis in all member states. This will not only lead to a uniform international treatment of exposures secured by real estate, but will also lead to a harmonization of valuation practices, especially where there are national practices and regulations between EU Member States.