Mr. Patrick Davitt:

Thank you, Chairman, Deputies and Senators. The Institute of Professional Auctioneers and Valuers, IPAV, was established in 1971 as a representative professional body for qualified, licensed auctioneers, valuers and estate agents. IPAV is the only Irish representative body solely catering for the professional and educational requirements and needs of auctioneers and valuers and, in 2013, represented almost 800 members nationwide. IPAV has three categories of membership for practising auctioneers and valuers in Ireland which enables it to cater for the professional ... property professional, the certified valuer, the recognised valuer, REV, and this is through its association with TEGoVA, the European Group of Valuers Associations, using the blue book and the European valuation standards.

The institute is governed by a national council of 20 members from throughout the country. The institute is further supported by an executive council which consists of IPAV president, senior vice president, junior vice president and CEO. I am the chief executive officer of IPAV, appointed in May 2013, and I'm responsible for the day-to-day running of the institute.

A summary of IPAV's main objectives are: it was originally set up to provide a professional, representative organisation for auctioneers, valuers and estate agents to protect, advance and promote professional standards among its member; to promote professional competence among its members; to protect the interests of members, as between themselves and between non-members and general public; to provide a system of professional education; to ensure education plays a continuous and significant part in its members' professional development; to apply, petition or promote in the Republic of Ireland any Act of the Oireachtas, EU directive or other legal measures in order with a view to attainment of the above objectives; and to establish a disciplinary committee, consisting of five internal and two external professionals.

IPAV has submitted to the committee IPAV's memorandum and articles of association, as amended in 2013, which details the structure and process of IPAV. Further to this, all documents supplied by IPAV to the committee and detailed in the metadata sheets is, to the best of my knowledge, true and correct. To the best of my knowledge, the majority of documents supplied to the committee are in the public domain. However, some documents, such as IPAV practice handbook, the blue book valuation templates and the blue book terms of engagements are specifically for IPAV members and are available to IPAV members in the members area only of ipav.ie.

Chairman, in relation to the specific references, B4b and R5d, I am asked to comment upon, I wish to make the following points but, before so, I wish to emphasis that I can only comment in relation to IPAV and my role as CEO.

Self-regulation through IPAV: all IPAV valuers are subject to self-regulation through IPAV. Unlike auctioneering and estate agency, which is governed by the Property Services Regulatory Authority, there are no national valuation standards for valuers in Ireland. However, IPAV undertook the role as self-regulator for its own members. While the valuer must possess the necessary qualifications, experience, ability, knowledge and training, he or she must always be objective and professional in his or her view and in appraisals and assessment of value. In many cases, it will be necessary for the valuer and, where appropriate, any valuation company, to show that he or she is independent of any party interest in the outcome of the valuation. Any such connection, or potential conflict of interest, or threat to the valuer's independence and objectivity, should be disclosed in writing to the client and recorded in the valuation report and the terms of conditions.

Conflicts of interest: it is important to note a quote from the Central Bank of Ireland, CBI, paper Valuation Processes in the Banking Crisis - Lessons Learned - Guiding the Future in the final paper of 18 December 2012, a copy of which has been supplied by IPAV to the committee. And they say:

Where a conflict of interest exists, the valuation is not independent and accordingly it is much more likely that the valuation provided is neither robust nor reliable. All valuations include judgements, but where a conflict of interest exists, it is more likely that such judgements are biased and not in favour of the lender.

The area of conflict of interest is also addressed under IPAV's code of conduct and TEGoVA's Corporate Governance and in the blue book itself. Again, copies of these documents have been supplied by IPAV to the committee.

Article 4, paragraph 76 of EU Regulation No. 575/2013, on 26 June 2013, defines market value and market value is defined as, "The estimated amount for which the property should exchange at the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion." Market value is internationally recognised as the assessment of the value of the property at a given moment in time. It estimates the price that could be obtained for a property at the valuation date, notwithstanding that date could alter over time and sometimes very rapidly. The definition of market value should be recorded in both the terms of engagement and the valuation report the valuers produce.

Valuation in general: the source of valuation and how properties are valued has been very topical in Ireland for many years. Basically the valuation process is broken into two segments: the methodology used to arrive at the valuation figure, there are five standard methods of valuation, namely, comparative, contractors, investment, profit and residual; and the standards used in writing the report. The valuation must be presented in a clear, written format to a professional standard, transparent as to the instruction, purpose, biases, method, conclusion and prospective use of the valuation. The valuation, as determined by the valuer, must be clearly and effectively conveyed to the client. The form and detail of the valuation report is a matter for the valuer's discretion, but must meet the specific instructions from the client to the valuer. A valuation report must adequately report all matters contained within the terms of engagement.

In line with the European valuation standards, EVS, a market valuation should report the following: the instructions for the assignment; the valuer's qualifications; the basis and purpose of the valuation; the valuation date; a description of the property, including a note as to the basis on which the area has been measured; a summary of the legal context - tenure, development control, etc.; a commentary on the marketability for the property; a description of the valuation method and analysis; any assumptions that have been made; any limits on the report; and the valuation standards supplied.

I am of the understanding that banks and financial institutions have generally organised and managed their own valuation panels, with some exceptions, where valuation panels are outsourced. IPAV valuers, in the past and to date, must apply to the relevant financial institutions to be accepted onto the panel. Central to acceptance onto a valuation panel is the holding of an appropriate level of professional indemnity insurance.

The valuation figure derived becomes the critical part of the valuation, as it helps banks and other financial institutions to decide the worthiness of the risk it's going to lend on. The valuation figure will only be reached by experienced, professional valuers, with years of experience in valuing property with their own competency. The standards, while important, are designed to give financial institutions an explanation of, and insight into, the process, factors and judgments applied to help arrive at the final valuation figure, though not a methodology.

Again, I am of the understanding that financial institution valuation panels have operated, and continue to do so, on the basis of getting a spread of valuers throughout the country with the necessary competencies and expertise required by the financial institutions to complete the particular financial institution's own valuation templates.

IPAV, as a professional representative body for valuers, has provided guidelines for practising valuers and regular courses and seminars on the subject. However, the actual compilation of the valuation report is a matter for the individual valuer. The completion of the financial instruction's template is a matter between the financial institution and the valuers completing it.

Again, I refer to the Central Bank report of the Valuation Process in the Banking Crisis - Lessons Learned - Guiding The Future, final paper of December 2012. I would like to quote from it:

Credit institutions should have a properly approved panel of valuers using appropriate selection criteria consistent with the loan portfolio risk. An institution should have [an] on-going assessment of performance to enable a valuer remain on the panel. This assessment should include a review of [the] valuers performance and professional indemnity insurance...

Credit institutions should ensure that no one firm of valuers has the bulk of their valuation business. Consideration should be given to having no one valuer doing more than, say, 33% of all valuation reports.

Credit institutions should report any concerns in relation to non-ethical behaviour, including instances of unrealistic valuations, to the appropriate regulatory body. In such circumstances, CBI recommend that credit institutions remove such valuers from the panel, which effectively bans them from working with the credit institution...

The valuers duty of care is to the credit institution and this should be emphasised by credit institutions in their written instructions to valuers...

Instructions to valuers for property valuations on collateral security should come from the credit institution in accordance with its clearly defined terms of engagement. Fees should only be discharged by the credit institution. It is for the credit institution to decide as to how it will allocate such costs.

Valuation reports should always be addressed to the credit institution that is advancing the [loan].

And I just want to talk for a minute on European valuation standards, as that's what IPAV use. In the absence of national valuation standards, and following the economic crisis, as part of its ongoing review to increase the professional standards of its members, IPAV carefully studied the valuation process and standards available in Europe, and its choice was to either adopt the English or European valuation standard. After detailed analysis and consideration, IPAV concluded that the European valuation standards, EVS, of the blue book were the most appropriate for IPAV's needs. IPAV believed that with the UK threatening to leave the EU and Ireland committed to Europe, it was both prudent and progressive for IPAV valuers to accept and adopt the EVS.

IPAV was awarded membership of the European Group of Valuers Associations, TEGoVA, in 2012 and also appointed as their administrator in Ireland. From this, IPAV introduced its members to the recognised European valuation, REV, scheme. This scheme is administered across Europe by TEGoVA, which in 1996 created the blue book. This book is continually updated and is now in its seventh edition. There are approximately 2,200 REVs throughout Europe and by 31 December 2013, and 60 of those were in Ireland. The EVS of the blue book are recognised as reliable International standards by the Central Bank of Ireland, the European Central Bank, and the European Parliament.

To achieve REV status, IPAV educates its qualified valuers through its specially tailored courses, held in the Institute of Technology in Tallaght. This ensures that IPAV members who complete this course meet with the expected minimum educational standards, MER, of TEGoVA, a copy of whichhas been supplied to the committee. IPAV’s qualified valuers are those who are professionally qualified, experienced valuers, with a minimum of ten years practical experience, and who have at their fingertips vast knowledge, comparable instructions, and details of sales in their own area. Since the REV qualification was first introduced in Ireland in 2013, all IPAV REV valuers must agree and sign up to a contract that demonstrates their commitment to IPAV and also confirms the level of self-regulation it imposes. Compliance and standards are the cornerstone of the EVS valuation reports, and IPAV compliance officers monitors and examines valuers’ written valuation reports on an ad hocbasis. IPAV, as the administrator of the REV scheme in Ireland, is subject itself to five years reviews.

I will now move on to R5d. R5d - appropriateness of relationship between Government, the Oireachtas, the banking sector, and the property sector. Again, Chairman, I wish to begin by starting ... I can only comment on the role of IPAV and its members' relationship with the Government, the Oireachtas, the banking sector, and the property industry generally. I will summarise briefly as follows.

The Government: IPAV has always engaged with members of Government in regard to lobbying on various items of legislation and issues of interest as they arise. For example, IPAV makes an annual pre-budget submission to the Minister for Finance and Minister for Public Expenditure and Reform, and, in recent years, has also made presentations to the Joint Oireachtas Committees on Finance and the Public Service, and Department of Agriculture. IPAV has engaged, as necessary, with the Minister, Minister of State, and senior officials in the Department of Environment, Community and Local Government in relation to housing and related matters. Ministers and Ministers of State have attended and addressed IPAV’s annual conferences and regional seminars over the years. IPAV has always kept lines of communication open with Members of the Dáil and Seanad, both Government and Opposition, in briefing them on relevant issues as they arise both individually and in committee. IPAV makes regular submissions to joint Oireachtas committees where useful exchanges of views regularly take place. IPAV has nominating rights to Seanad Éireann and members are from time to time elected to either House.

The property industry itself: IPAV has engaged with parallel professions and professional bodies in the property business and industry. IPAV representatives have regularly attended conferences organised by related professionals and institutions and have made, and continue to make, a determined effort to engage with all stakeholders in the industry. Representatives of such professional bodies are invited to attend IPAV’s annual conference.

And the banking sector: IPAV has engaged as much as possible with the Central Bank of Ireland and individual financial institutions. IPAV lobbied for the inclusion of the blue book as one of the preferred standards in the CBI final report issued in December 2012.

And my conclusion, Mr. Chairman: Overall, it is IPAV’s view that the relationship between the four sectors, Government, Oireachtas, banks and property stakeholders, should be one of being independent of each other, yet communicating through the correct and transparent channels for the betterment of all, and the common good of Irish society. While the priorities of the sectors often differ, as is to be expected, IPAV believes there should be an ongoing dialogue between the stakeholders. However, to date it has tended to be sporadic rather than consistent. In this regard, IPAV has long advocated the need for establishment of a property council, which would be representative of all stakeholders and which would help advise Government in a holistic way on all issues in relation to property. While it would advise participants, it would be expected to respect the democratic imperative that Government governs and have the final say on any policy initiative. IPAV believes such a body, which would have a purely advisory role, would have the potential to play an enormous part in helping build a sustainable property market, bringing about stability and avoiding future troughs and peaks, as have occurred in the recent past. Volatility may serve isolated interests. It does not serve consumers, it does not serve the auctioneering profession and it does not serve the common good.

Thank you for all for listening to my long statement, and I'll take some questions.