Standardized Valuation of Real Estate Reflecting Cyclical Economic Development: Experience of the Last Two Decades

The real estate development in Estonia, as in all Baltic States, is strongly related to the restoration of independence in these states in 1991. On the one hand, the birth of the real estate market and therefore the need for real estate valuation were not grounded on empty space, so from the historical perspective, the roots of the valuation procedure reach the first years of the twentieth century. On the other hand, the development of valuation was a subject of the reorganization of economics, as it changed from planned economy to market economy. Therefore, the development of economy and the real estate market, including the valuation procedure, began in the context that accounts for the cyclical behavior thereof. In addition, various politically important dates, like the start of the membership in NATO, membership in the EU, or two monetary reforms, play a huge role in this process. The current environment of valuation procedures is a result of the publication of the edition of the International Valuation Standards (The translation was based on the edition of IVS 1994) (IVS, 1994) in 1997, which, in cooperation with professional certification, led to permanent national valuation standardization. In fact, a large amount of the valuation reports are addressed to the housing and other investment sectors that, in turn, reflect the behavior of the construction and industrial sectors and the health of all economy. Indeed, while the interrelated sectors are or the overall economy is rapt by the market cycle, the consideration of the cycles’ influence becomes unavoidable.