Editorial

Citation

Plimmer, F. (2009), "Editorial", Property Management, Vol. 27 No. 1. https://doi.org/10.1108/pm.2009.11327aaa.001

Editorial

Article Type: Editorial From: Property Management, Volume 27, Issue 1

On 4 November, 2008, a unique event took place. No, I do not mean the election of the 44th President of the USA. I am referring to the conference on Automated Valuation Models (AVMs), organised in London by the Royal Institution of Chartered Surveyors (RICS) in association with the International Association of Assessing Officers (IAAO), the USA’s professional association for valuation officers – effectively. This is the first time the two organisations have held a joint conference. The conference was sponsored by Rightmove Data.

Unlike in the UK, where there are, basically, four taxable jurisdictions comprising of England, Northern Ireland, Scotland and Wales, and where there is a huge level of commonality between these, in the USA, every county in every state is a separate jurisdiction for property tax. In some countries, the assessing officer is an elected post, so it does not always follow, therefore, that assessing officers have a high level of relevant professional education and/or training. The IAAO has been very active and effective in providing both professional education and professional standards for a range of relevant issues, including AVMs.

The themes of the conference were basically how AVMs are being used both for tax assessment and for lending purposes; how they can be linked to images, and GIS; and how they can be used for a range of purposes, including sales/purchase price estimation, tax assessment, and for mortgage lending purposes. Although most of the speakers were from the USA, there were two main British presentations.

Mary-Lou Downey and Gill Robson from Northumbria University presented the results of their research into “AVMs: an international perspective”, which categorised various countries in relation to their use of AVMs as either established; developing; fledgling; and early stages. The UK is “Developing”, while the USA, Canada and Sweden are “Established”. Their paper discusses both the drivers and constraints of AVMs. In addition, they discussed their earlier work for the Council of Mortgage Lenders on AVMs for the lending market (downloadable from www.cml.org.uk/cml/publications/research) and also previewed their current research project on the use of AVMs in the UK and their implications for the public and for valuers.

Also from the UK, two members of the Valuation Office Agency (VOA) discussed the use of AVMs in the preparation for the aborted 2005 rebanding exercise for the Council Tax in England. Perhaps of more interest (because it was actually implemented and because it involved discrete valuations rather than banding) was the presentation by Alan Brontë from the Land and Property Services in Northern Ireland (which incorporates the VLA, the equivalent of the VOA, as well as the Ordnance Survey). Their use of AMVs (perhaps more appropriately termed computer-assisted mass appraisal (CAMA) techniques), the issues that arose (including the need to train staff in statistical techniques) and how they resolved them, were particularly interesting.

Given that UK commercial property tax (uniform business rates) requirements include an individual valuation for each taxable property, but that tax payers invariably have a huge expectation of a high degree of horizontal equity (all similar properties should have the same taxable value), it was interesting to hear that, despite all the technology, it was necessary to amend some of the valuations to ensure that all similar houses in the same street had the same rateable value.

Indeed, this was one of the main messages from the conference. The use of computers is nothing more than the latest in a line of valuation aids, from the slide rule, the calculator, the computer and now the more sophisticated AVMs, or CAMA techniques. The role of valuers as interpreters of data, IT-based processes and CAMA/AVM output are crucial.

It became clear during the conference that there are several reasons why the UK does not make more use of such techniques and these boil down to an absence of comprehensive, public and freely available data – particularly transactional and property characteristics data, and the failure of what data sets are available to be compatible, e.g. the Post Office address database does not match the addresses used by the VOA to identify taxable properties.

In the USA, however, things are very different. The free and public availability of data, together with a much wider use of GIS (thanks, at least in part, to compatible databases) means that much more use is made there of AVMs, GIS and photographic imagery. Demonstrations from the American presenters included the use made of assessor data for disaster management, e.g. directing the emergency services to gas and water mains; and restoration after hurricane damage. The opportunity to compare last year’s visual (satellite/spatial) images with this year’s visual images allows assessors to add newly constructed properties to and remove demolished properties from the tax roll. As indicated above, the IAAO has a standard for AVMs (available as a free download from www.iaao.org).

Also of interest to those assessors among us were the images of buildings which the assessors could not reach on foot (or in “automobiles”) but which could be photographed from the air and measured from the photographs (!) so that the assessors could add those buildings to the tax base and serve their owners with appropriate tax demands. For one jurisdiction, some $9 million worth of property was identified in this way in one year, ensuring an increased annual yield to the authority of about $250,000.

It should be remembered that the USA does not have the same requirement for individual valuations as the UK, so the use of mass appraisal techniques is not thwarted by legislation or regulation. Indeed, many US jurisdictions operate annual revaluations (on occasions using an indexation factor), which, of course, ensures relatively small but frequent adjustments in the value of taxable property. This can be compared to the situation in Britain, when the introduction of the 1990 rating lists (the first ones since 1973) caused such outcry that transitional arrangements were introduced to phase in both the increases and decreases in tax liability. They remain with us, despite quinquennial revaluations.

Contrary to my expectation, little if any statistical knowledge was required to get the benefit of this conference. It seemed to be much more of a persuasion exercise as to the value of AVMs – if any persuasion was necessary. The RICS is hosting a meeting with AVM providers and other interested parties to discuss how the UK can benefit from this technology and develop its own standards (there is hardly a mention of AVMs in the Red Book and certainly nothing which could equate to the output of the IAAO). I for one await the outcome of this with interest.

AcknowledgementsEditor’s note: Guest Referee: Philip Leverton.

Frances Plimmer