Implications of the alternative investment fund managers directive on the real estate valuation system in Finland

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Insinööritieteiden korkeakoulu | Master's thesis
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Real Estate Investment and Finance
Degree programme
Master’s Programme in Real Estate Economics
88 + 13
Real estate valuation occupies a prominent position in the real estate industry and profession. Its importance to real estate investment and finance as well as other investment classes cannot be overemphasized. This is because valuation has been ascribed the basic and attributive discipline of the profession and because the ability to place monetary value underlines all other professional pursuit. This special nature of real estate valuation makes it a professional occupation which requires some form of regulation. Real estate valuation has been long known to be regulated and controlled by Valuation Professional Organizations via set of standards. However, there has been observed external interventions in regulating real estate valuation, such as the European Union’s AIFMD. This study examines the potential effects the provisions of Article 19 of the Alternative Investment Fund Managers’ Directive (AIFMD) 2011/61/EU and its Level II regulation (EU) No 231/2013 pertaining to real estate valuation would have on real estate valuation system in Finland. This in addition involves investigating the dimension and direction of effects the observed potentials changes brought about by the Directive has on the system. Since this research is a first of its kind which relates to peoples experience, it is carried out by gathering qualitative data via 9 semi-structured interviews with thematic questions each addressing the observed potential changes. Observed potential changes were based on content analysis of the Directive, its regulation and series of concerned organizations publications. In the outcome of the research, it was found that most of the changes brought to the valuation services and functions did not have any direct effect on the system. However, it was discovered that some of the changes and challenges brought to valuer and valuation profession industry has been underplayed; such as the unlimited liability clause and use of valuation models. Overall, it was found that the Directive poses a great challenge on the real estate valuation system as to the establishment, pronouncement and recognition of an authority by own legislature as the Valuation Professional Organization in order for it to deliver in the face of this Directive and maybe further external interventions that might occur. It has been advised that the circumstances which might lead to the growth of the use of valuation models or the decline in the use of external valuers be researched in future as well as the impact and challenges the use of valuation models might place on real estate education in the distant future.
Viitanen, Kauko
Thesis advisor
Harju, Raisa
AIFMD, real estate valuation, external valuers, internal valuers
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