11 compensation. If there is agricultural land with perennial plants, agricultural office
will account additional values of the trees or plants for compensation purposes.
In general for many centuries, the role of valuation has been an activity associated with government activity, especially in relation to taxation and property
acquisition for public works. With the industrial revolution and capitalism, the development of major
urban areas and increasing demand for housing of workers streaming from the country-side to work in factories, it produced some new faces: industrialists and
developers. The people needed financial assistance using land as collateral and the lenders needed advice about the value of that collateral. The valuation was born
and it has continued up to the present to be an important part of the property finance business although it is rarely very noticeable to those outside the business
area.
2.3. Principles for Land Value Zones
According to INLA Project report, the principles for land value zones are described as below. A land value zone is a geographic area where comparable
parcel objects have approximately the same market value. The number of value levels sets the ambition of the valuation model, since each zone covers a range of
values around a given norm object value. More levels give smaller ranges. The ambition of the model is set by the differences in value levels, which
will also be evident from the number of zones. One proposal can not be difference in value levels higher than 20 and lower than 10. The difference in percentage
should be smaller for higher values.
12 The total number of zones will of course be much higher than the number
of value levels, since each market value level will be present in many urban areas, sometimes in several locations. The work is a kind of iterative work where there is
a need of both knowledge of the market and values of land parcels but also use of reliable sales. It is easiest to start with large roads. The highest prices are found
along roads with a lot of traffic or other places where there are a lot of people in movement for example around universities.
There are two different ways to work with the fact that different parcels have different land use in the work with zoning. The market behavior differs due
to the type of property. Therefore it can be good to have different valuation zone systems. One possibility is to have valuation zones for agricultural, residential,
commercial and industrial units respectively. This way to work with separate value maps for different kind of land use is useful if the planning regulations are
strict. With strict planning regulations the permitted land use according to the City Plan is very important. It is also good with separate value maps for different land
use if the values are not updated so often. If there is a system with only one land value map it is important that the land use planning has had influence of the
zoning. There should also be possibilities to reduce the values for parcels where a change to a higher and better land use is not possible in the short run according to
the planning. Every value zone must have a unique identity. First there can be a letter for
type of value zone, for example A for agricultural and R for residential. Then there must be a unique number for region, district and municipality. The last part
is a unique number for each value zone in the municipality [INLA Project, 2003].
13
2.4. Land Valuation by PBB and BPN
