Appraisal Practice in Central & Eastern Europe

Article excerpt

The sweet flavour of democracy in the CEECs is here to stay. It is within this framework that the market economy will become successful. As their market economy strengthens, so too will a market-based professional appraisal practice. As we know all too well, valuation activity is directly proportionate to economic growth.

early 20 years ago, about half way through my career as a real estate appraiser, (or valuer, as we are more commonly known outside of North America), I had my first exposure to the international scene. As President of our Institute, I attended the 7th Annual Pan Pacific Congress of Real Estate Appraisers, Valuers, & Counselors in Rotorua, New Zealand. Afterwards, I delivered a paper in Brussels, Belgium, on the subject of foreign investment in Canadian Real Estate. In sharp contrast to what I found in Europe, the experience in New Zealand at the time, and subsequent visits to Australia and other countries in Southeast Asia, revealed that the practices and procedures of valuing property in these latter regions were very similar to those in North America. Thus, I was left with the impression that the profession had a very common and uniform functional basis; i.e., very few differences existed in the ways and means of practicing in this field-at least westward from Canada.

Europe, on the other hand, was another matter. It soon became apparent that the professional appraisal practice in Western Europe was more of a science than an art. Market values were commonly formulated through application of the cost approach, as we know it. The majority of valuers were educated and trained in the technical professions, particularly engineering, surveying, and other sciences. A professional appraiser was a professional engineer; not unlike the situation in Central and South America (even today), and not unlike the situation in Quebec prior to the 1950s. These technical practitioners were assisted by estate agents, or real estate brokers. Such persons were held in high esteem since they usually operated with impeccable integrity, honesty, and forthrightness. Being a civil engineer myself, and having been exposed extensively to cost approach applications early in my career, I was able to relate to Western European practices. They were however, unusual when compared to North American methods. My exposure to appraisal practices in Central and Eastern Europe' came after the break-up of the Soviet Union.

Of course to fully understand and appreciate appraisal practices and procedures in Central and Eastern Europe today, a reflection upon the entire evolution of the profession is suggested. Since it had its modern origins in the late-1800s, it calls for an introspective look at the political structure of these Republics during the past 50 years, in contrast to events that have transpired during the past five years. However, due to space limitations, this manuscript will discuss the appraisal profession as it was reborn, or reignited in 1991. In my view, the appraisal profession in the CEECs (Central and Eastern European Countries) will be on a par with the status of our institutes and societies by the end of this decade. To date, the resurrection has been nothing short of extraordinary.

THE RETURN TO INDEPENDENCE

The collapse of the Berlin Wall in 1989 signalled the "beginning of the end" of controlled economies in Central and Eastern Europe. As joyous as the thoughts and events of independence were to become in the ensuing years, the Republics lacked the initial internal wherewithal to engineer the reformation. The first day of each Republic's independence totally shocked and shook the entire political, social, economic, and legal infrastructure to its foundations.

Independence and reformation began in earnest in 1991, with the act that effectively dissolved the USSR and released 28 Republics from state control. Thus, the gradual and very painful transformation to a market-based economy began; occasionally with shocking velocity (as in Poland), but very gradually in the Republics of Southeastern Europe that lacked the financial and economic infrastructure needed to kick-start the transition. …