Property valuation for mortgage purposes in Poland

The purpose of this paper is to describe the property valuation methods that are applied in Poland. It shows that they base on international standards and are a reliable source of information for international investors and banks.

The valuation methods are described and critically assessed, potential problems are pointed out. The analysis of lending risk is analysed on data about non-performing loans (NPL).

Polish valuation methods are in line with international methods, but there are some risks, like small number of transactions, subjective behaviour of valuers. The low NPL ratios indicate that the valuation works correctly.

The Polish valuation methods are trustworthy, non-performing mortgage ratios are low, however, banks and investors should ask whether there is a local zoning plan. Moreover, they should look critically at the comparables that were used during the valuation process, if in their opinion the valuation is overly low or high.

This paper focusses on valuation from a financial stability perspective. It uses Polish literature and data on NPLs to give an insight on valuation of property and mortgage risk in Poland. Besides the review of the methods it points out the problems related to valuation uncertainty, such as the risk of subjective behaviour of valuers and the low number of transactions in some regions, which are used for valuations.