As appraisers, we are often consulted on the valuation criteria for sustainable housing. The ECO Order 805/2003, which governs official valuations, does not explicitly take energy saving and sustainability factors into account. But this is about to change.
Until now, sustainability criteria have been implicitly included in ECO regulations. Thus, any energy efficiency factor that is positive and attractive for better marketing or better maintenance could have a tacit impact on the value of the asset and could be taken into account by the valuator.
The new ordinance, which is still in the hearing and public information phase, promises to adapt to current challenges, integrating sustainability criteria and climate risks that will affect the valuation of properties.
Modification of mortgage valuation regulations
The proposed amendment to the regulation of mortgage appraisals in Spain promises to introduce significant changes that will transform the approach towards greater sustainability and accuracy in property valuation.
Among the most important new features is the incorporation of the principle of sustainability into the ECO Order. This change reflects the growing relevance of sustainability in the sector, integrating, in addition to traditional physical characteristics and building materials, environmental and climatic aspects under the principle of prudence.
It also adds the obligation to include the Energy Efficiency Certificate (CEE) as necessary documentation, which will be added to the property's registry and cadastral documentation, which is currently included.
In addition, the new text emphasises the admission of essential licences, if they meet certain parameters, as sufficient documentation to be able to value buildings under construction. This responds to the demand of developers, especially in Madrid, where they can now start construction with a Basic Licence and yet could not access credit until they had a definitive Building Licence. This modification may bring some risk to financing and it is possible that it will be modified in some way in the final text.
On the other hand, a new valuation method is introduced: the automated valuation method (AVM). Although its inclusion has raised some doubts, this tool aims to modernise and streamline the valuation process, although it would require further clarification as to its specific purpose and the conditions of its use.
Finally, changes are being implemented to improve quality control in valuations, focusing on the accuracy of the areas adopted, the quality of comparables and the homogenisation of data.
These adjustments to appraisal regulations, in addition to adapting the sector to the current demands of sustainability and financial security, also seek to streamline and modernise the real estate appraisal process in Spain.
Considerations on sustainability standards in appraisals
Legal and regulatory perspective. The introduction of sustainability and environmental risk analysis in valuations aligns Spain with global industry trends and could anticipate future European regulations. This regulatory proactivity gives Spanish companies a competitive advantage by preparing them to comply with possible stricter requirements in the future.
Economic impact. By requiring the Energy Performance Certificate in appraisals and allowing construction to commence with Basic Licences, the real estate market is expected to experience a greater fluidity in transactions. This could result in increased construction activity and faster marketing of new developments, benefiting developers and buyers.
Technological challenges. The introduction of the automated valuation method (AVM) poses significant technological challenges. Valuation firms will need to invest in advanced technology and staff training to adapt to these systems.
Corporate Social Responsibility (CSR). With the increasing importance of sustainability factors, companies in the real estate sector will have new opportunities to demonstrate their commitment to CSR. This, in addition to boosting the public image of these companies, will also be attractive to investors who value sustainability as an essential component of their investment decisions.
The introduction of the sustainability factors in real estate valuations is an important step towards a more sustainable European real estate sector. At Gesvalt, we remain committed to further collaboration and innovation to continue to make a positive impact across the industry.