European Valuation Practices, how to compare valuations internationally

The last decennia more transparency has entered the real estate markets in many countries because of the increase of performance measurement of institutional real estate holdings by the Investment Property Databank IPD. The performance measurement consists of direct return, mainly based on net rental income and indirect return based upon (yearly)valuations of the properties. Quite a number of investors invest not only in their home country but in other countries as well. Especially since the introduction of the Euro, real estate investors became even more interested in investing cross border since between euro countries the exchange rate risk disappeared. However, the question is how well can we compare valuations in one country to the other ? What are the similarities in the valuations across countries, what are the differences? To investigate that and in cooperation with IPD and RICS we have set up a survey to find out the differences between the countries, initially for 8 countries : France, Germany, Italy, Netherlands, Portugal, Russia, Spain and the UK. The initial findings show already how different valuations in each country are and that adjustments will be necessary to allow for a realistic comparison of indirect returns. The ultimate intention is to expand to all European countries within the EU and hopefully also to other continents as well.