TECNOBORSA SCPA - Per lo Sviluppo e la Regolazione del Mercato Immobiliare

The United Nations Economic Commission for Europe (UNECE) in cooperation with Tecnoborsa S.c.P.A., has organised the First European Real Estate Summit on the 19-20 September 2002 in Rome, Italy. The Forum brought together official representatives from more than 50 European countries, NGOs and other international partners operating in the real estate sector in Europe. The Eastern Europe participants of the Forum have been involved in the preparation of the UNECE/REAG Benchmark Survey, a tool to monitor the development of the real estate markets in Europe. In this regard, a Benchmark Survey Questionnaire was distributed to the official representatives coming from Transition Economies who were attending the Forum.

At the time of the Summit, 17 countries responded to this Questionnaire:

Albania; Armenia; Azerbaijan; Belarus; Bosnia; Bulgaria; Croatia; Czech Republic; Estonia; Georgia; Hungary; Latvia; Lithuania; Moldova; Romania; Slovakia; Ukraine.

The main results are summarised below.

In most of the responding countries, a property right system is not only in place but also legally well regulated. However, in 96% of the responding countries there are still negative cultural or social attitudes towards property ownership and the State retains the right to expropriate property.

In 90% of the responding countries, there are policies aimed at developing the land market as a result of a stable political and economic climate. Also, 88% of the responding countries affirm the existence of real estate market legislation guaranteeing market transparency.

In nearly all the responding countries, a land registry and a land cadastre are in place, well coordinated and open for public inspection at reasonable cost.

Regarding the judicial system, 70% of the responding countries affirm having a well-trained and independent judiciary to adjudicate fairly on private property rights and contractual disputes. Also, 88% replied that court rulings related to such adjudication are in force.

Foreclosure and eviction orders appear to be enforced in 75% of the responding countries, but in only 28% of them can foreclosure actions be initiated other than through a judicial process.

In most of the responding countries (89%), there is a balanced system of control of the uses of the land and a comprehensive set of regulation on urban/building policies is in place. Regarding the financial market, 60% of the responding countries affirm that their capital markets and banking sectors are well developed. However, only 40% affirm that the mortgage sectors are developed and well regulated. This helps explain the fact that the average returns on investment in real estate are 65% less than on other investments. Restrictions on financial intermediaries are allowed in 64% of the responding countries.

Even if insurance companies operating in real estate markets appears to be covered by an adequate regulatory regime, only 59% of these insurance covered sufficiently against fire, standard risks and natural disasters.

In nearly all the responding countries (93%), there is nondiscriminatory access to credit markets and in the 60% of the cases there are an adequate research and monitoring of the real estate sector by regulatory or market-based supervision in terms of banking oversight, underwriting criteria etc.

Credit Rating Agencies are operating in 53% of the responding countries where a standard format for credit rating is also in use.

In half of the responding countries, there are tax incentives or disincentives to invest or trade in land. Also taxes on land and transactions in land do not provide sufficient revenue to pay for the management and the administration of the State’s land policy.

Out of the responding countries affirming that they have a formally adopted set of written valuation standards (70%), 53% assert that valuation standards were derivatives of International Valuation Standards; the remaining 47% created the standards locally on an independent initiative of the governments. About 70% of the responding countries affirm that a government-regulated certification process is in place for appraises, but for 65% there is not yet sufficient transparency in data recording for comparable sales transaction information. Also, only in the 57% of the responding countries it appears possible for the all the valuators to access this information at an affordable cost.

In 88% of the responding countries, it appears there are a sufficient number of real estate experts who provide competitive services. These services are regulated (in 59% of the countries) and monitored by central government (in 46%).

Approximately 70% of the responding countries affirm that there is a distinction made in the law between land and buildings and these are treated separately in real estate transactions. In nearly all the responding countries (90-95%) prospective buyers or tenants of any type of real estate have a range of tenure options to choose from which can be sold, leased/rented or mortgaged.

Most of the answering countries affirm that there are regulatory price restrictions on real estate inputs (e.g. labour, capital land, materials), real estate services (e.g. broker, surveyors, valuation experts) or real estate products (e.g. rent control). Also, the same number of countries admits that there usually are substantial delays in bureaucratic approval procedures for real estate development.

Around 53% of the responding countries affirm that the costs of formally transacting in real estate are high and that there are generally extra-legal constraints that inhibit (partially or totally) private individuals from entering into private contracts with respect to interests on land.

Finally, in 70% of the responding countries there are still some issues to be resolved in order to complete the registration of title.