International Valuation Conference – Yangon, Myanmar 18 June, 2019 “Role and Importance of Valuation in Myanmar” ー Today, Tomorrow, & Future — What is Valuation? Hiroyuki Isobe Managing Director, Japan Valuers (Myanmar) Co., Ltd. Founder and Chairman, Japan Valuers Co., Ltd. Certified Real Estate Appraiser(Japan) CRE(USA), FRICS(UK), RICS Registered Valuer 1 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
INTRODUCTION-1 2 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmhyanmar.com
INTRODUCTION-2 What is Real Estate? How is Real Estate utilized in our economy? Basis of everything for HUMAN Basis for living Basis for agriculture/diary/fishery Basis for forestry Basis for natural recourses Basis for manufacturing Basis for entertainment Basis for public usages such as transportation, roads, parks, governments, religions, education, hospitals, etc. How Valuable is Real Estate? Probably the most valuable and important asset on the earth. 3 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
REAL ESTATE VALUE 4 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
PROFESSIONAL VALUER/APRAISER Where did the professional valuation start? Why was the professional valuers/appraisers needed? Valuers/Appraisers had existed, but not well qualified. In USA, the subjective valuation of collateralized real estate had In USA, it started after the Great Depression of caused enormous amount of bad debt, default, bankruptcy. 1929 in USA. American institute of Real Estate Appraisers was established in 1932. In Japan, the steep increase of land price because of rapid In Japan, it started in 1963 when the Real Estate economic growth had caused serious disruption in people's lives Appraisal Law and the license of Real Estate and business activities. The Land Price Publication systems Appraiser enacted. The Real Estate Appraisal enacted from 1970. Standard was established at the same time. 5 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
VALUATION USER Who uses the professional valuation and when/how is it used. At the time when the government sectors buy/sell/lease real estate.* At the time when the government sectors assess the property tax basis.* At the time when the financial institutions take collateral when financing.* At the time when the arbitration is required to resolve the disputes. At the time when the parties establish joint venture company. At the time when the investment decision needs to be made. At the time when the inherited property is to be fairly divided. * Mandatory by law in many countries. 6 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
TYPICAL CATEGORY OF VALUE What is the typical value that professional valuers/appraisers derive? Market Value The definition of market value as defined by the International Valuation Standard (IVS) “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeable, prudently and without compulsion". 7 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
APPROACHES TO VALUE What is the methodology of valuation/appraisal globally applied? 1. The Sales Comparison Approach This approach is the most frequently-used and accepted approach to determining value in real estate valuation/appraisal practice. This approach to value bases its opinion of value on what similar properties (known as “comparables”, or “comps”) in the vicinity have sold for recently. These properties are adjusted for time, acreage, size, amenities, etc. as compared to the property that is being appraised. Understanding which (and to what extent) adjustments are reasonable for a given market area (for a given property) relies on the experience of the appraiser. A property characteristic that is highly valued in one neighborhood may not be valued to the same degree in a different area. 2. The Cost Approach This approach seeks to determine how much a property would cost to replace (meaning, rebuild) after subtracting accrued depreciation. Accrued depreciation is the reduction in actual value of property over a period of time as a result of wear and tear or obsolescence. The term reproduction cost is used if an exact replica of the original property is produced. The term replacement cost is used if a property is rebuilt with comparable utility, but using current design and construction methods and materials. The cost approach is considered to be more reliable when used on newer construction. The methods and results of the cost approach are considered to be less reliable with older construction. The cost approach appraisal is frequently the only approach that is considered to be reliable when appraising special use properties such as public properties (libraries, schools, pagodas, or churches) which are not traded on the open market. 3. The Income Approach When a property generates income, that income, or potential for income, helps to substantiate, calculate or identify the market value of the property. Apartments, offices, shopping centers, hotels, and logistics facilities are examples of income-producing properties. Valuers/appraisers use the income derived from the property as part of the assessment the market value of the property. Japan Valuers (Myanmar) Co., Ltd., http://wwwjvmyanmar.com 8
VALUATION/APPRAISAL STANDARD 9 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
VALUERS/APPRAISERS LICENSE IN JAPAN 10 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmarcom
PFOFESSIONAL VALUATION SERVICES IN MYANMAR 11 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
THANK YOU 12 Japan Valuers (Myanmar) Co., Ltd., http://www.jvmyanmar.com
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