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“REAL ESTATE MARKET AND VALUATION PROCESSES”

Edited by
Sabina Źróbek

2013, Zagreb, Croatia

Scientific Council:
Prof. Vlado DADIĆ Ph.D. Dsc., Institute of Oceanography and Fisheries, Split, Croatia
Prof. Wojciech WILKOWSKI Ph.D. Dsc., Real Estate University in Warsaw, Poland
Ph.D. Dsc. Katarzyna SOBOLEWSKA-MIKULSKA, Warsaw University of Technology, Faculty of
Geodesy and Cartography. Department of Cadastre and Land Management, Warsaw, Poland
Ph.D. Dsc. Grażyna SZPOR, Faculty of Law and Administration, Cardinal Stefan Wyszynski
University of Warsaw, Poland
Ph.D. Vlasta BEGOVIĆ, Institute of Archaeology, Zagreb, Croatia
Ph.D. Agnieszka DAWIDOWICZ, University of Warmia and Mazury in Olsztyn, Department of Real
Estate Resources, Olsztyn, Poland (secretary)
Ph.D. Małgorzata GAJOS, University of Silesia, Faculty of Computer Science and Materials Science,
Institute of Computer Science, Sosnowiec, Poland
Ph.D. Małgorzata LESZCZYŃSKA, University of Warmia and Mazury in Olsztyn, Department of
Geodesy, Olsztyn, Poland

Scientific Editor of Monograph:

Prof. Sabina ŹRÓBEK Ph.D. Dsc., University of Warmia and Mazury in Olsztyn, Department of
Land Management and Regional Development, Olsztyn, Poland

Reviewers Board:
Ph.D. Dsc.Radosław WIŚNIEWSKI, University of Warmia and Mazury in Olsztyn, Department of
Land Management and Regional Development, Olsztyn, Poland
Ph.D. Zvonko GRŽETIĆ, Hydrographic Institute of the Republic of Croatia - Split, Croatia

Published by:
Croatian Information Technology Society – GIS Forum,
10 000 Zagreb, Ilica 191e, Croatia
University of Warmia and Mazury in Olsztyn
10-719 Olsztyn, Oczapowskiego 2, Poland
University of Silesia,
40-007 Katowice, Bankowa 12, Poland

Editor:
Davorin KEREKOVIĆ, prof., Croatian Information Technology Society – GIS Forum, Zagreb, Croatia

© Copyright
Croatian Information Technology Society – GIS Forum, Croatia
University of Warmia and Mazury in Olsztyn, Poland
University of Silesia, Poland
All rights reserved

International Standard Book Number:

ISBN 978-953-6129-36-2 Nacionalna knjižnica, Zagreb, Croatia
 Authors

Adamczyk Tomasz, Adamiczka Jerzy, Bieda Agnieszka, Budzynski Tomasz,

Dąbrowski Janusz, Jasińska Elzbieta, Kucharska-Stasiak Ewa, Parzych Piotr,
Rączaszek Andrzej, Sajnóg Natalia, Trojanek Maria, Źróbek Sabina, Żurek Sławomir

“REAL ESTATE MARKET AND VALUATION PROCESSES”

Edited by
Sabina Źróbek

2013, Zagreb, Croatia

Contents
Introduction ...................................................................................................................................................... 1
1. Market value of the property in Polish and global perspective and
its accounting ....................................................................................................................................... 3
1.1. Evolution of the notion of property market value in
Polish valuation practice .................................................................................................... 5
1.2. Methods of revealing the potential of the property in the process of market
value estimation ................................................................................................................... 13
1.3. Valuation of properties left on the territory lost due to
military operations ............................................................................................................. 22
2. Methodical aspects of property market analysis ................................................................ 31
2.1. Prediction of transaction prices with using of time series* ............................... 33
2.2. The influence of administrative decisions on the development of
commercial – retail properties market ....................................................................... 42
2.3. Analysis of the real estate market in consolidated areas .................................... 50
2.4. Regression tree model as a tool for credit decisions ............................................ 61
3. GIS as instrument of property market research.................................................................. 73
3.1. Application of GIS spatial analysis for mapping of
average prices of dwellings ............................................................................................. 75
3.2. The map of land prices and the land value map in Poland and chosen
European countries............................................................................................................. 84
4. Properties as revenue sources for municipalities in Poland .......................................... 93
5. ‘Second League’ – the world’s smaller demographic potentials with
population count ranging from that of Poland to 100 million.................................... 113
References .................................................................................................................................................... 121
Notes of the Authors................................................................................................................................. 127
0
INTRODUCTION
The transformation period in Poland have been accompanied by significant changes of
ownership relations and structures. The privatization processes required, among others, defining
the rules of property valuation and understanding the definition of “market value”. It is very
important because this category of property value is used in many market processes and in the
business trading. Many ideas how to define the meaning of market value can be found in the
international professional standards and in the literature and legal regulations. In Poland, this type
of value is defined in the Act on Real Estate Management. It should be added here, that in the EU
directives many references to this kind of value can also be found.

In the process of property valuation, it is necessary to understand the property market,

particularly the decision – making mechanisms that operate within it. Valuation means assessing
the value for particular purposes and is strictly related to the type of the assignment, i.e. the value
of the specific right to real estate in order to take decision on buy or for compensations for lost
properties as the result of the Second World War.

Property valuer must learn to accurately assess the potential residing in property – just as
the buyers and investors do.

This scientific monograph mainly focuses on:

1. evolution of the definition and interpretation of the market value of the property in
Poland
2. methods of revealing the potential of the property in accounting its market value
3. problem of compensations for lost territories due to result of the Second World War –
case of Poland
4. methods of and ways of:
a) considering influence of time on real estate value,
b) determining influence of administrative decision on commercial – retail properties
market,
c) analysis of the property market in consolidated areas.
Information about the value of land and about the average price of land is very important
in the process of land management. In this monograph one can find the concepts of preparation of
the maps with the spatial distribution of these data.

For a significant numbers of banks the appraisal report of the property is needed.
Regression tree model would be in this case used as a tool of credit decision.

Properties are important revenue source for municipalities budget. The changes in the
level and their structure occurred after 2003 when a new Act on local governments’ revenues was
passed are described.

At the end of publication an analysis concerning demographic potentials and changes in

growth dynamics are presented.

prof. Sabina Źróbek

Scientific Editor

1
2
1. MARKET VALUE OF THE PROPERTY IN POLISH AND
GLOBAL PERSPECTIVE AND ITS ACCOUNTING

3
4
1.1. EVOLUTION OF THE NOTION OF PROPERTY MARKET VALUE
IN POLISH VALUATION PRACTICE

Abstract
The aim of the study was to present the evolution of the definition and interpretation of the
market value of property in Poland as well as showing problems in the stage of understanding and
acceptance of this value concept. Their source is an institutional dimension of the market, including
its customs and habits, a slowly changing awareness of both the theoreticians as well as
practitioners. The study pays attention to the complexity of the value category which results in the
fact that the legal regulations or regulations in professional standards do not have to be understood
in the same way by people performing the valuations and also their recipients. We can use a
uniform definition and its interpretation in the scale of a given country (or even the globe), but
understand the category differently which is obviously reflected in the defined level of the value as
the result of valuation. Lack of understanding of this category influences the valuation result,
decreasing its usefulness in the business trading.

Keywords: market value, highest and best use, hope value

1. Introduction
The beginnings of a transformation period in Poland have been accompanied by significant
changes of ownership relations. Introduction of market rules has sparked privatization processes.
Moving towards market economy has required valuation from the point of view of an exchange
phase, which is defining the market value. A definition and understanding of this category in Poland
have been subject to major changes.
The aim of the study is to present not only the evolution of definition and interpretation of the
market value of property but also to present the influence of customs, habits, resistance in the
change of awareness in assimilating this value concept. Moreover, the study is to show complexity
of the value category which causes that law regulations or in professional standards do not have to
be understood in the same way by people performing valuations and also by their recipients. We
can use a uniform definition and its interpretation at the national level (and even the globe), but
understand the category differently, which is obviously reflected in the defined value level as the
valuation result. A proper understanding of this category influences the valuation result,
determining its usefulness in business trading.

2. First definitions of market value and their influence on valuation practice

The privatization processes required defining the rules of property valuation. Due to a long
legislation process, already in 1994 the Ministry of Spatial Development and Construction
published “Temporary Rules of Property Valuation”, recommending their implementation. Based
on British standards, the market value was defined in this document as “the most probable price
possible to be obtained in the conditions of a free market, with the assumption that:
- parties of the transaction are independent and neither of them is acting under compulsion,
- property is exposed on a free market long enough, taking into account the nature of rights towards
the property and market condition,
- transaction parties are aware of advantages and disadvantages of the property,
- there are no special conditions restraining a free operation of the market” (“Temporary Rules...”),
Still, no explanations of the definition were provided which must have caused – taking into
account the complexity of this category – lack of its understanding and free interpretation in
practice.
A year later, in 1995, the first definition in the light of law appeared. The legislator gave this
category a marginal importance – in the directive on detailed rules of establishing the property
value it has been decided that the market value of property “shall be understood as its predictable
price possible to be obtained on the market.” (Directive...). It constituted a significant narrowing of
the market value concept provided in the previous valuation methods. In valuation practice, such a
formulation gave broad interpretational possibilities.

5
3. Definition and interpretation of market value in the light of Professional
Standards from 1995
An almost a milestone for the Polish valuation practice was a publication of the first Professional
Standards of Property Valuers adopted by the professional organization in 1995. For the first time,
the basic rules of property valuers’ professional practices were regulated. Their aim was to
standardize the professional practice of people organized in associations being a part of the Polish
Federation of Property Valuers Association, harmonizing the rules of conducting activity in the area
of valuation by Polish property valuers with the ones which are commonly binding in highly
developed countries, promoting uniform rules of conduct which are binding in the circles of
property valuers influencing developing their professional and civil-law responsibility as well as
shaping requirements and expectations of people ordering valuations towards those who perform
them, securing the interest of the ordering parties by formulating requirements that valuations
should meet and enabling carrying out a valuation of a particular valuer’s activity with applying
objectified criteria, such as standards. A catalogue of objectives shows that they have been of
significant importance not only for the valuers but also for the recipients of the valuations.
The standards were in compliance with requirements of the European Group of Valuers of Fixed
Assets TEGOVOFA (presently TEGoVA). In the process of their establishing regulations on property
valuation in the United States, Canada and Great Britain were significant. One of the standards,
standard III, was devoted to a definition and interpretation of market value of property as a basis of
the valuation. The standards introduced two values: the market value and replacement value, called
a replacement cost decreased by wear and tear. British experience has had the biggest influence on
the shapes of the adopted definitions1.
The property market value has been defined as: “…its most probable price possible to be obtained on
the market taking into account the following assumptions:
a) parties of the agreement are independent from each other and they are acting rationally, not being
driven by certain motives,
b) they have a firm intention of reaching the agreement,
c) they are aware of co-existing circumstances influencing the property value,
d) they are not acting under pressure,
e) the period of required display of the property on the market has passed, with applying an
appropriate advertisement and time required for negotiating conditions of the agreement, taking into
account the nature of the property and market condition”.
This definition is much broader from the one included in the directive on detailed rules of
valuation, it also introduces some new elements in comparison with the definition included in the
“Temporary Valuation Rules”. First of all, it assumes that the parties are acting rationally, not being
driven by particular motives, second of all it introduces the requirement of the firm intention of
concluding the transaction. Rationality of behaviours means making decisions on the basis of the
present condition of the market and eliminating speculative behaviours. Adopting the requirement
of the firm intention of concluding the transaction – apart from the assumption that the parties are
not acting under pressure – eliminates market data reproducing the so-called amateur prices,
relatively high and occasional prices, relatively low. This means that the seller is not looking for a
special customer of property who is willing to pay more than others and the purchaser is not
looking for special occasions, namely property sold under pressure.
For the first time, a value interpretation has been provided. It was still scarce, which must have
decreased the practical usefulness of the standard. The standard stated for example that:
- an expert should assume that selling the property takes place on the day of valuation,
- the established value of the property has to reflect the market condition on the day of valuation
and correspond to a price which could be obtained while reaching an agreement of sale and in the
period of the property exposition on the market and in the period of agreement negotiations the
prices have not changed,
- the agreed market value of the property should not be increased by the certified property valuer
by a sum corresponding to taxes and fees that a potential buyer of the property will be obliged to
pay in connection with its purchase. In particular, VAT is such a tax.
An extremely important regulation of the standard was the following formulation: “Market value
should define the anticipated value that a property may have for a way of using other than the one on
the day of valuation, then, if there was an offer on the market to purchase this property for another,

1 One of the main authors of the study was Kris Grzesik, member of RICS - British professional organization.

6
specified way of its using”. In relation to this regulation, five kinds of market value have been
distinguished:
- market value for the present use,
- market value for an alternative use,
- market value for an optimal use,
- market value for a forced sale,
- market value for a future sale.
The kind of market value adopted by the certified property valuer resulted in particular from:
a) stipulations of the agreement with the entity ordering a valuation survey,
b) purpose of making the valuation.
c) condition of the property market and particular conditionings of a given property.
Each kind of value received an additional explanation in the standard. Market value for the
present use was defined with adopting an assumption that the property would still be used in
accordance with its present use. It took into account value changes connected with expansion,
redevelopment of buildings and development of free areas. The authors of the standard wrote that
this kind of value may be applied “mainly in valuation of property occupied by an enterprise for its
own purposes, with an assumption that the enterprise will be continuing its operation in a
foreseeable future.”
In accordance with the definition, the market value for an alternative use reflected a prospective
using of the property for purposes other than the present ones. It should not constitute a basis to
establish the value of property occupied by an enterprise for its own purposes if the enterprise
continued its operation and the alternative use could be carried out only by liquidation, winding up
or transfer of the enterprise to other space or to another property.
Market value for an optimal use meant a special market value variant for an alternative use. It is
based on establishing the value with an assumption of an additional condition of the most effective
and best use of the property which is real and in accordance with law, physically possible,
financially feasible and providing the highest value. It should be applied in particular for valuation
of non-developed lands designed for development.
In accordance with the standard, in defining the value for an alternative and optimal use, the
certified property valuer has to base on particular pieces of information or data justifying the
possibility of such a use. He may not adopt unjustified or unrealistic assumptions.
In practice the three first values have been accepted, the two remaining ones, which constitute
departure from definition assumptions of the market value (abandoning the assumption of
performing a transaction with no pressure and abandoning an assumption that the value is defined
on the day of valuation) have not won the certified property valuers’ approval. One of the
arguments was certainly difficulties with defining and justifying the result of the valuation. Another
argument was the fact that it would be difficult to treat them as market value.
From the first three kinds of value a definite priority was obtained by the value of the current
use. From the perspective of almost 20 years, a part of professional circles in Poland has been
aware that the concept of market value for the present use was not properly understood in Poland
and also that it was abused in practice. We have not paid attention and have not understood the
aforementioned interpretation that this kind of value may be applied “especially in valuation of
property occupied by an enterprise for its own purposes, with an assumption that the enterprise
will be continuing its operation in a foreseeable future”. It was conceived by the author of the
definition that this kind of value should constitute a basis for the valuation when the present use
corresponds to the best use as well as to define the value for the purposes of financial statements 2 .
Common acceptance in practice of the value for the present use has lead to decreasing the value of
appraised property, clearly influencing obtaining lower transaction prices.

2On a seminar, organized in Cracow in 2012 by RICS and the Polish Federation of Property Valuers Association, the author of
the market value definition, Kris Grzesik, apologized the professional circles that he had suggested us this kind of value, not
knowing that then there had been no requirement of valuation for financial statements in Poland.

7
4. Statutory definition of the market value
The basic definition of the market value can be found in the Act from 1997 on Property
Economy. It is defined as “...a predictable price, possible to be obtained on a market, set with taking
into account transaction prices obtained having fulfilled the following conditions:
- parties of the agreement were independent from one another, they were not acting under pressure
and had a firm intention of reaching the agreement,
- time necessary to expose the property on the market and negotiate the agreement conditions has
passed”.
The definition is only ostensibly a repeat of the regulation included in the professional standards.
The seemingly insignificant changes introduced by the legislator cause that it does not reflect the
essence of this category properly, since:
- it does not refer to the need for defining the value on the day of valuation, which constitutes its
considerable substantive drawback. The value, regardless the scope in which we are using this
notion, is always of a dynamic nature, which means that it is subject to continuous changes. Its
definition requires defining a particular date for which it is identified,
- the definition indicates the valuation methodology, since it quotes transaction prices as data,
taken from the property market; the definition should not refer to methodology3,
- while defining market conditions of concluding a transaction the legislator used past tense instead
of the present: “...the parties were”, “...the parties were not acting”, “...they had”. The regulation is
still referring to the methodology of valuation, imposing removing market information from both
exceptionally low as well as high prices. Getting rid of bargains and amateur prices constitutes a
process of looking for typical, most frequent prices occurring on the market in order to objectivise
its participants’ behaviours. The process of removing data should not constitute an element of the
definition. Using the past tense is not correct, since the value as the most probable price refers to a
future transaction, therefore it has to specify future conditions of its concluding. This means that a
specific value could be deemed as the most probable price, if parties of the transaction are
independent, are not acting under pressure and have a firm intention of its concluding.
It is puzzling that all attempts to correct the legal definition, undertaken by theoreticians, have been
to no avail. The professional organization has not taken a stance on this issue, which may suggest
that practitioners pay more attention to the valuation methodology than to definitions, they use the
value category without its understanding. This point can be proven by marginal treatment of the
value category in literature on the rules of valuation (E. Kucharska-Stasiak, 2012).

5. Influence of International Valuation Standards on the market value

definition in Europe
5.1. “Highest and best use” concept
A spur to further changes in the market value interpretation in Poland was the seventh edition
of International Valuation Standards in 2005 which showed the requirement to define market value
with assuming the optimal use, in Polish literature called as the highest and best use. The notion of
the optimal use was deemed as a fundamental and integral part of the market value estimate.
It is worth emphasising that in the discussed standards in “Changes Introduced between the
Sixth (2003) and Seventh (2005) edition of IVS” no attention is paid to the correction of market
value interpretation. On developed property markets the rule of “the highest and best use” (IVS
2005, pp.9-10) has been the fundamental rule of valuation for years. The concept of the highest and
best use has been commonly used in valuation in the USA since 1903.
The highest and best use means an actually possible, properly justified, legally acceptable,
financially feasible and providing the highest value of the appraised asset.
This rule reflects typical, that is most frequent, behaviours of the market participants. Under one of
the fundamental rules of valuation, the rule of anticipation, a typical investor purchases an asset for
benefits that can be derived in the future from its possession.
The “highest and best use” concept has been maintained in further editions of IVS in 2007 and
2011.
It needs to be emphasised that the condition of optimal use, as the only possible use of a
property, introduced in 2005 by the International Valuation Standards constituted a breakthrough

3
Theoreticians of valuation, especially in the United States, criticised the definition of the replacement value, pointing out
that this is not a definition of the value category but only a description of reaching the value. At present, the International
Valuation Standards as well as European Valuation Standards are not using this category.

8
in understanding of this category. In many European countries, following the example of British
regulation, the market value could be defined as the value for the present, alternative but also
optimal use. The present use could be the best use but did not have to be. Such a divergence could
take place in defining the value for the purpose of financial statements assuming that an enterprise
will be continuing its activity in a foreseeable future. This means that the optimal way constituted
one of the possible assumptions on the property use.
Already in 2000 TEGoVA approved the concept of the „optimal use” stating that “...the use which
is not legally acceptable or physically possible cannot be deemed as optimal. The use, meeting both the
condition of legal acceptability and physical possibility may require a convincing explanation that
adopting this very use is likely and properly justified. Having proved, by means of analytical
deliberations, that one or more uses are possible, conclusions should be verified by means of a
feasibility study. Such a use which leads to achieving the highest value is an optimal use and that is
why the value for the optimal use is a notion analogous to the market value definition” (EVS 2000).
Searching for the highest and best use has been deemed as the core of valuation. With the IVS
2005 publication it was established that there is one market value, defined with assuming the
highest and best use. The present use can be the best use. Assuming the highest and best use has
been deemed as fundamental in the international valuation procedure and is strongly emphasised
in literature of the subject. Numerous authors underline that the “highest and best use” concept is
fundamental in the valuation process and should be preceded with choosing the valuation method
(Lennhoff, Elgie, 1995). Choosing the optimal use is therefore seen as the most important decision
made in every appraisal. The optimal use is a starting point of the valuation process and making a
valuation survey. This use is to reflect the behaviour of market participants. This is the best from
the most likely uses of a property. It has been agreed that an analysis of the optimal use is not some
secret knowledge but “...a logical, common-sense process, repeating actions that a typical purchaser
would take while analysing the property in question. The majority of property is used in the most
rational way, since the majority of owners will be doing what is: legally acceptable, physically possible,
financially profitable, of highest yield. In other words, a statement that the majority of property on a
given market is already used most rationally as developed property is not unusual” (Rattermann
2009).
International Valuation Standards Committee (IVSC) has obliged membership countries to
adopt and observe the definition and interpretation of market value: “Membership countries are
obliged to inform IVSC about any significant differences between national and international
standards, so that the international community could be informed about the differences (IVS 2005).
The Committee agreed that is case of “... differences, certified property valuers should calculate and
explain differences in value being a consequence of these divergences” (Ibid., p. 28).
Both the definition and interpretation of the market value based on the “highest and best use”
concept was again repeated by TEGoVA in IVS in 2009: “The notion (of value – author’s note) is
generally based on the optimal use” (EVS 2009, p. 20). However, the value for an alternative use as
the basis of valuation was mentioned as one of non-market values.
The definition of value, included in the International Valuation Standards, published in 2007 and
in the European Valuation Standards from 2009 was the same as a definition in the EU Basel II of
2006, it was consistent with the majority of market value definitions implemented in European
countries (Ibid., p. 19).

5.2.European concept of “hope value”

It seemed that great success has been reached in the global scale – the definition and
interpretation of market value, which was acknowledged as the valuation basis were unified.
Still, the Royal Institute of Chartered Surveyors (RICS) in the latest edition of their standards, which
are recognized internationally, entitled RICS 2011 Global Valuation Standards (VII edition)
departed from the concept of optimal use as the only principle of defining the market value by
introducing a less restrictive assumption on using a property which on the day of valuation is not
permitted by law but can be permitted in the future and the market is already reflecting the
anticipated rise of value in prices. This concept has been named as hope value (EVS 2012). It has
been well-understood and applied in Great Britain for ages where it is believed that the future
potential use which is still unlawful can be taken into account in the market value on the condition
that there is already demand on the market for such a property with future potential. Such an
interpretation of value results from the planning system in Great Britain, where the certainty of
obtaining a construction permit appears only after issuing a local authorities’ decision on the

9
building development conditions. Before this decision it can only be assumed, namely hoped, that
the local authorities will give a positive decision. Before issuing the decision, the market value will
be lower than after its issuing, but it will already include the hope value.
Already in the fourth edition of EVS (EVS 2000) the notion of “hope value” was quoted, defined
as a constituent of the property value, exceeding the value for its present use. It takes into account
an uncertain nature or scope of such kind of perspectives, including the time, in which obtaining a
planning permission or overcoming all related limitations could be expected so that applying the
valuable use would be possible (EVS 2000, Annexe 7).
Following the RICS’s standards, TEGoVA, in the latest edition of the standards (EVS 2012)
definitely introduced a principle on property use which on the day of valuation is not legally
acceptable but can be acceptable in the future, and the market already reflects the anticipated rise
of value in prices. It can be seen in the following formulation:
“[…] A hypothetical seller will not accept a lower price for this property, and a hypothetical
purchaser will not be willing to pay more than he would pay for a similar property which could be
used by him in a similar way. Since each point of the definition of the optimal property use (except
for the evidence requirement) imposes certain limitations on the market value definition, the rule
of optimal use does not have to be the same as market value, no matter how higher it might be than
the value for the present use. The most apparent difference is based on excluding potential permits
or other future possibilities with which the market would involve the hope value and in relation to
which it would assess chances, risk and costs.” (Grzesik, Źróbek, 2012).
Regulations on “hope value”, introduced by EVS 2012 can be even deemed revolutionary, since they
contribute to extending the concept of the market value. Still, they reveal the duality of this value
interpretation in the world: in IVS the market value is based on the “highest and best use”, in
Europe there is an additional possibility of defining the value with assuming the “hope value”.
Organizations such as RICS and TEGoVA have decided that the optimal use concept imposes too
strong a limitation on this value category. Participants of the property market can see the potential
which is in property, confirming this in the prices of concluded transactions despite the fact that
implementing this potential has still no legal permission. If the valuation is to reflect the market,
than it seems that the “hope value” concept shows well the behaviour of its participants. The value
is set on the basis of behaviour based on anticipated usefulness.

5.3 Attempt to implement new interpretation of market value in Poland

After the publication of IVS 2005, introducing the only market value, based on the principle of
the “highest and best use”, professional circles in Poland began to prepare a new professional
standard. Time of preparing and passing the standard by the Polish Federation of Property Valuers
Association as well as stormy discussion in the professional press prove difficulties of accepting the
new concept. The standard was adopted by the National Council of the Polish Federation of
Property Valuers Association as late as in 2009.
An attempt to implement in Poland the new interpretation of market value as the standard
“market value and replacement value” was met with fierce criticism (compare with for example
Prystupa, 2010). It was argued that:
- the principle of optimal use is contrary to regulations of law which in many areas, for example for
the purposes of compensation, require defining the market value for the present or alternative use,
- the valuation based on the principle of the present or alternative use leads to defining the market
value, the requirement to define market value for the optimal use is wrong, since it does not reflect
the behaviour of property market participants’.
For example, participants of the property market, by buying a detached house do not consider a
possibility of its superstructure, therefore these behaviours do not entitle the certified property
valuer to look for the optimal way to use the property,
- the optimal use is a made-up way of future use and is contrary to valuation principles both from
the perspective of a comparative method as well as profit-wise. In the comparative method, this
assumption would mean the necessity to manipulate while choosing comparable property or using
some additional “optimum coefficient” in the comparative procedure. Also in the profitable
approach it would mean the need to define the market value in e a c h s i t u a t i o n with assuming
the highest and best use of the property,
- the highest and best use is the owners’ problem and possibly investment advisors’ since it is
difficult for the certified property valuer to examine whether there is demand for the property

10
purchase for the highest and best use as well as to define when and under what condition such a
use can be introduced
- adopting the optimal use for the purposes of securing the creditor’s debt will result in an increase
of the pool of unpaid credits and can lead to a crisis, the prove of which is the last financial crisis in
the world.
A similar argumentation was applied by other authors (Jędrzejewski 2010, Kalus 2010). Lack of
unanimity of the market value interpretation in the circles resulted in not accepting the standard by
the legislator4.
It is difficult to agree with the aforementioned argumentation since it does not reflect the
essence of the value as an economic category, objectivising the market. It is also difficult to agree
with the argumentation that the highest and best use interferes in legal regulations of the valuation.
It needs to be emphasised that the rule of the “highest and best use” is not a defining element of the
market value, but an element of its interpretation. This means that adopting the concept of the
highest and best use is not at variance with the legal definition of the market value, it also does not
have to be at variance with legal regulations on areas in which the legislator clearly indicates the
need to adopt another principle, since valuation standards, both at the European level (EVS) as well
as international (IVS) underline clearly that the certified property valuers should use the market
value definition unless regulations of law state otherwise (EVS 2009, p. 11, IVS 2007, p. 31). This
means that the new interpretation of value does not interfere in the valuation on areas which are
regulated by particular assumptions to define the market value, for example for the purposes of
compensation.
The valuation is to reflect the behaviour of market participants and the rule of the “highest and
best use” accompanies the participants of the market. It is proven by the following behaviour of
these participants creating both supply and demand:
- sellers’ behaviour: property owners, putting it up on sale are selling its potential, for example
people selling a post-industrial property know that it will not be used for this purpose anymore,
that the buyers – apart from renovation, modernization – will adapt it to another function, a
function which will give it a higher value. Sellers, aware of the potential in the sold property, want
to participate in the profits from this kind of potential.
- buyers’ behaviour: buyers of property, calculating the maximum price that are able to pay for the
land take into account its potential, often a potential that they will be able to create. The certified
property valuer, just confirms in the valuation process the potential already discovered on the
market. He does not create it since it would be at variance with the essence of valuation, based on
looking for a value objectivising the market, a value established on the basis of dominating market
data. The purchaser is not buying the past, he is not buying the presence, he is buying the future.
This means that adopting an assumption of the present use in the valuation process cannot each
time lead to defining the market value since there is no demand for the property for the given
(present) use. If the property has no market with the current use, searching for a different way will
be needed (Ratterman 2009).
The aforementioned means that the sellers assess the purpose of the buyers’ future purchase of
the property. Demand, expressed by the purchasers, depends not only on the prices paid at present,
but also on non-price factors which include for example: expectations concerning the future,
including the possibility of a different use of the property.
Looking for the highest and best use does not mean that other than the present use should be
adopted for e a c h property. A detached bungalow or a bungalow with usable attic, located in a
residential area of detached houses c a n n o t be valued for the purpose of defining the market
value with an assumption of its superstructure or a change of its function for example to an office.
Purchasers are presently looking on the Polish market for a one-storey house. If any of them files a
request, after the purchase, for superstructure of a change of the function (from the residential
function to office function), this will not show the dominating behaviour of market participants
whose reflection is binding on the stage of defining the market value. For the majority of property,
the present use will be reflecting its highest and best use. Continuing this thread it needs to be
strongly denied that it was looking for the highest and best use for the residential properties that
lead to mortgages crisis in the United States, spreading into a global financial crisis and affecting the

4
In accordance with the will of the Polish legislator, the certified property valuer has to obey the regulations of law and
professional standards. This means that the professional standards have to be agreed by the legislator.

11
real economy in the global scale. For the majority of these properties the highest and best use was
repeating the present use.
Among counterarguments, often quoted by lawyers and supporters of law domination in the
valuation in Poland, there is a small share of the country’s area, for which there are local area
development plans. Market analysis allows noticing that a lack of local plans is not an obstacle for
investors (developers) in carrying out their investment plans. The lack of local plans will
undoubtedly prolong this process but will not make it impossible. The investor, at his own cost, will
lead to a change of the local plan. This indicates the appropriateness of adopting the “hope value”
principle in the valuation process.
It is observing the market that allows the certified property valuer to reflect the current
behaviour of investors. The price that the buyer will pay for a property is based on his conclusion
on the most cost-effective way of using the property. In the valuation process the valuer repeats the
dominating behaviour of market participants, he does not create them. If the valued property is
bought by an investor or a developer and their vision of this property development will be different
than assumptions applied in the valuation process it does not mean that the valuation was made
incorrectly. It was based on assumptions of typical, former behaviours of the market participants.
An investor (developer) may always show on the market who will discover an even bigger potential
that the previous participants. His development vision allows achieving an added value, it is an
expression of creating by him an individual value, higher than the market value. An Australian
developer who purchased a post-industrial property, which is in the national register of historic
monuments in Łódź, can be an example of such behaviour. He has led to adopting a local plan and
adapted it to a residential function (lofts). It was an inventive function on the market. In the process
of valuation – on the basis of the current behaviour of investors – the property has been valued
with assuming its office and storehouse function since this was the market evidence that the
certified property valuer has had. Even if the valuer, during the valuation process, had had a signal
about the vision on using the property by the future purchaser, he would not have been able to take
it into account in the adopted assumptions for the valuation, since it was not confirmed by the
market. This means that applying the highest and best use assumption requires understanding of
the market participants’ behaviour, indicating the need of its reflection in the valuation process
which is to objectivise its participants’ behaviour.

6. Conclusion

Summing up, the concept of market value and evolution of its interpretation in Poland is
influenced by international organizations, responsible for drawing up professional standards: IVS
and EVS. Unfortunately, they have created a common definition of value, they have not worked out
its common interpretation. Adopting other interpretational assumptions concerning the market
value by TEGoVA, recognized as the main basis of the valuation, proves that two concepts of market
value have been clearly distinguished as a result of clashing of two schools of valuation: the
American and British school. The European valuation school is being written about more and more
often whose shape is largely influence by the British school.
Terminological chaos is widening on the scale of particular countries. This is proven by the
presented evolution of the value concept shown on the example of Poland. An institutional
dimension of the market, including habits, slowly changing awareness, legal regulations have a
significant influence on adopting and accepting valuation rules on the national level and as a
consequence also the valuation process and value level. It can limit significantly the freedom of
spreading the International and European Valuation Standards. Lack of unification of the market
value strengthens the role of the National Valuation Standards, which – taking into account the
national legal regulations, transparency of the national market, level of its development,
understanding and accepting the concept of valuation – can derive simultaneously from numerous
schools of valuation. This supports an argument that acknowledging in some European countries
the International Valuation Standards as the National Standards cannot be deemed sufficient.

12
 1.2. METHODS OF REVEALING THE POTENTIAL OF THE
PROPERTY IN THE PROCESS OF MARKET VALUE ESTIMATION

Abstract
Property is worth as much as the market itself – namely, it is worth as much as the
participants of the market are willing to pay for it. Moreover, the value of the property may be
measured by its potential. This is the fundamental statement of this article, and the authors
attempt to introduce it with regard to establishing the appropriate method of determining market
value.
In the process of property valuation, it is necessary to understand the property market,
particularly the decision-making mechanisms that operate within it. Therefore, one must learn to
accurately assess the potential residing in property – just as the buyers and investors do. The
authors emphasize that only the detailed residual analysis, which takes into account all the
advantages and disadvantages of certain solutions and is preceded by Highest and Best Use
analysis, may provide the answer to the question of market value of a given property with the
potential for development. If there are any limitations to the development of the valued property or
properties chosen to be compared with regard to their possible use, they rarely would be reflected
in valuations undertaken with the use of the comparative method. However, the residual method of
valuation allows to take into account both the advantages of a property and the disadvantages that
might depreciate its value.

Keywords: real estate, Highest and Best Use analysis, residual method of valuation

1. Introduction
The word “value” has become a term used in all human, social and economic sciences. It has
recently been introduced into the realm of technical and biological sciences as well.
This context reveals a certain paradox – the widespread use of the word “value” does not
coincide with the proper understanding thereof.
Władysław Tatarkiewicz, the eminent Polish philosopher, thus commented on value:
“Defining “value” is difficult, if possible at all. Just like the words “existence” or “consciousness”. What
seems to be a definition of value is merely a replacement of the word with another, similar in meaning
– like “good”, or it is a periphrasis. Such a periphrasis takes one of two forms: either it says that a
thing’s value is the trait that makes the thing worth of existing, rather than non-existing, or it says
that value is a thing’s trait that makes us want this thing, that makes us need it.(Tatarkiewicz, 1978)”.
Economic theories claim that value is an abstract category, emerging in the market as
exchangeable value, or market value which takes the form of a price. However, the question
remains – what is the basis of that quantitative exchangeable relation: use value, rarity of goods, or
marginal utility, i.e. the extent to which these goods are in demand.
Thus, value determines the quality of goods – also the immovable ones, among which
property could be included.
Property and space management is taking place amid the growing competition between
local governments that seek the increase in their budgets. Moreover, the authorities need to
provide spatial order and meet the needs of the local communities, considering also the other
parties that perceive property as a market commodity and means of capital investment.
The aforementioned situation requires the introduction of an active, complex policy
concerning space that would take into account the increasing value thereof.
A prominent element of spatial and land-use planning is land valorization, which nowadays
takes the form of market value estimation with regard to the current or optimal use of the area in
question.
Initially, valorization meant the determination of the land’s usefulness for various planning
purposes (i.e. determination of the so-called use value). Value estimation consists of the qualitative
comparison of lands and the current/future demand for particular use, i.e. the determination of
their economic, or market, value.
Estimation results have influence on the form of certain norms and models concerning the
outlook of space. Thus, they create a framework for planning activities and property management.
The notions of value, price and cost are frequently used in procedures related to the
realization of land management policy with regard to property.

13
 Many decision-making processes are driven by the results of the property market analyses,
or the results of property valuations carried out by professional valuers.
Property’s value depends on a number of factors that constitute its surroundings, where a
property could be possessed, used or sold. These factors include: localization, supply of technical
infrastructure appliances, size, microclimate, unemployment rate, loan acquisition cost, the
community’s habits, central and local legal regulations.
Thus, determination of value requires the analysis of numerous features, including their
scope and impact, as well as the ability to measure them.

2. Potential for development as a creator of the property’s value

Adequate determination of property value requires the knowledge of legal regulations,
valuation theory and mechanisms that govern diverse areas of activity of various participants of the
market.
Valuation theory claims that there are many kinds of value, and the methodology of
defining them depends mostly on the kind of property, its legal status, the purpose of valuation and
the current state of the property market. Polish law distinguishes the following kinds of value:
market value, reinstatement value, cadastral value, mortgage lending value, initial value of fixed
assets, book value, insurable value, liquidation value. The use of any of these values depends on the
needs of the interested party.
What then would be the value of a vacant plot of land – according to the land-use planning
intended for residential development, owned by the gmina (commune, the basic unit of territorial
and administrative division in Poland) and granted the perpetual usufruct:
 when the gmina intends to update the perpetual usufruct annual fees, the valuer appraises
the market value of land as subjected to the right of ownership;
 when the perpetual usufructuary sells the property, the amount of most taxes and fees
related to the turnover depends on the market value of the right of perpetual usufruct;
 if the amount of property tax in Poland depended on the said property’s value, the
cadastral value should be determined as the amount similar to market value;
 mortgage lender (the bank) determines the amount of the given loan in relation to
mortgage lending value, which by definition is lower than market value;
 individual investors are more interested in the amount of future income that can be drawn
from the capital invested in property rather than in the current value of that property.
In the process of property valuation it is essential to consider both the theoretical and practical
paradigm:
Property is worth as much as the market itself – namely, it is worth as much as the participants
of the market are willing to pay for it. Moreover, the value of property may be measured by its
potential.
Those who undertake valuations need to understand the property market and correctly
interpret the expectations and capabilities of buyers. Therefore, it is essential to learn how to
accurately determine and assess the potential residing in property – just as the buyers and
investors do. From the analytical point of view, the solution to the problem requires the selection of
appropriate methods for analyzing the available information rather than, as it is often observed in
practice, the adaptation of the existing information to popular analytical methods, such as
econometric models (Renigier-Biłozor and Wiśniewski, 2011).
The better one can recognize the traits of a property (particularly those that contribute to
the emergence of a given price on the market), the easier it is to find the most probable transaction
price, which emerges at the crossing of supply and demand. It is relatively easy, by adapting the
comparative method, to value typical properties that are frequent objects of transactions on the
market and whose traits influencing prices are fairly easy to identify and quantify. This may be
done intuitively, like the buyers do, or by the use of the apparatus described in valuation theory by
applying the comparative method. But what happens when an investor deals with more specialized
property, such as investment lands, developing properties (under construction, reconstruction or
modernization etc.) or other properties with development potential that are sought after on the
market, but there are no comparable sales transactions? The investor, buying investment land,
above all considers its productivity and usefulness in achieving profit, for instance by developing it
and then selling, renting apartments or commercial areas. If the buyer purchases land for
residential investment, the crucial information for him (and for the valuer) is how many square
meters of useable apartment area could be built on that property. It may happen – and it often so
does – that properties similar in size, technical infrastructure supply and other physical and legal

14
traits may possess a different investment potential. The reasons may be for instance the building
code and technical requirements that the residential buildings have to meet. This case can be
illustrated by an example of an analysis undertaken for an Irish investor interested in purchasing
property in a big Polish city. The detailed analysis and conceptual design enabled to establish that
“the solar path” (determining the amount of the necessary insolation of the elevation) will “cut”
about 30% of the residential area out of the building designed on that property. Some other similar
properties, free of that flaw, were sold at a higher transaction price (Adamiczka, 2011).
The importance of Highest and Best Use analysis, which provides the crucial information
for property valuation process, has been asserted by the following academic publications.
David C. Lennhoff and William A. Elgie (1995) indicate that the results of HBU analysis are
fundamental in valuation and should be undertaken before the application of a specific valuation
method. Scribner (1997) claims that the valuation report contains numerous conclusions, of which
two are the most important; namely – what is the best use and what is the property’s value. The
first conclusion could be a result of an extensive study, and the second conclusion depends on the
preceding one. Scribner emphasizes that property value is a function of its capacities, of how it
could be used, and that is not firmly determined and therefore requires numerous analyses.
Highest and Best Use analysis constitutes a bridge between the concerns of economy,
statistics, means of use, nature of particular property and the needs of purchasers, who consider
multiple options of current and potential development.

3. Highest and Best Use analysis of the property as a supporting instrument of

the valuation process
HBU analyses comprise, among others, sale possibilities and legal, technical and financial
feasibility. They may be applied to new investments and the already existing ones alike, as the cost
of multiple refurbishments of developments is similar to the cost of erecting an entirely new
building. However, a valuer undertaking HBU analysis of developed property which does not
indicate the optimal land use must take into account the possible economic profitability of the
existing use in the context of the market. Replacing the existing building with a new one, of higher
standard, may cause the lack of tenants who will not be able to bear the higher rental costs.
It should be noted that while the valuation result is presented in a quantitative manner
(value represented as an amount of money), the outcome of HBU analysis is represented in a
qualitative, descriptive manner.
The process of analysis consists of six stages:
1. Examination of legally allowable uses (property law, limitations, law of obligations, land use
planning, environmental law, building code etc.);
2. Description and analysis of the technical and physical features of the site (surface, boundaries,
topography, waters etc.) that enable to establish whether the intended use is physically possible.
Sometimes the cost of removing a certain element in order to change the use is so high that the
higher value brought about by the new use will not recompense it;
3. Analysis and assessment of the governmental and regional policies, examination of the local
authorities’ willingness to support the development (e.g. development facilities, transport and
communication network);
4. Examination of the market demand for the property uses remaining after the preliminary
selection. This stage includes:
- analysis of sale prices and rent each use in relation to qualitative traits of the property in question,
- analysis of building surfaces and their quality, analysis of standard with regard to the absorption
capacity in the market.
Conclusions of market analysis should be formulated on the basis of a careful examination
of competing investment history, demand and supply for the similarly used properties, changes in
the investment market since the time when similar investments have been absorbed by it. In
addition, the examination of the property’s capacity to satisfy the needs of the market for a
particular kind of investment.
5. Verification of the chosen variants of use in the context of economic profitability and with regard
to market circumstances. Generally, the highest and best use is claimed to be the one that equals or,
in the case of multiple variants of use, most remarkably exceeds the threshold of market
assessment criteria.
The study of financial feasibility compares the expected income, capital costs and risk of
use with market figures. While the market study is carried out in order to predict the intensity of
use, the study of financial feasibility estimates the profitability of use with regard to the investor’s

15
potential success on the property market. When the rates of return equal or exceed the level
desired on the market, the venture is claimed feasible. Therefore, study of financial feasibility is a
special stage in Highest and Best Use analysis.
6. Conclusive determination of highest and best use.
The last stage of the process is to formulate a conclusion concerning highest and best use
according to the following rule: the use that guarantees the highest price of the property or its
maximum productivity calculated with regard to the rate of return indicated by the market, is
deemed optimal, i.e. highest and best use.
Highest and best use that is different than the current one on the day of valuation can be
accepted for valuation only when there is market demand for a property with that particular
assigned use. Moreover, the competing properties of the same or similar uses need to be taken into
consideration as well.
It is worth emphasizing that the European Valuation Standards issued in 2012 have
modified the interpretation of high and best use by resigning from the requirement of legal
allowableness of use. This requirement remains applicable in EVS only in the instances of market
value assessment for the purposes of financial reporting (European, 2012).

4. Residual method of valuation as a means of investment property valuation

Only the detailed residual analysis, taking into consideration all the possible advantages
and drawbacks of certain solutions and preceded by Highest and Best Use analysis, may provide
information on the optimal use of property that possesses development potential.
The comparative method gives the best results when the typical, less diversified property
with identified potential is concerned. However, when the case is the analysis of more specific,
“advanced level” property (as in the aforementioned example), there is little chance of obtaining
reliable market information on its traits that exert most impact on the price. Therefore, what would
be the most appropriate method of valuation for investment land or developing property?
Let us consider reasons why investors purchase land or property intended for further
development.
The international valuation standards thus define investment property( International,
2011):
2.1. Investment Property. Property (land or building, or part of a building, or both) held (by the owner
or by the lessee under a finance lease) to earn rentals or for capital appreciation, or both, rather than
for:
2.1.1. use in the production or supply of goods or services or for administrative purposes; or
2.1.2. sale in the ordinary course of business.”
The situation in question is the purchase of property in order to develop it by planning a
certain investment which is legally allowable, physically and technically possible and provides a
maximum financial profit. A rational investor would surely do that, and the valuers should reflect
these market mechanisms. First of all, market mechanisms should be considered – it is necessary to
examine the market and seek for demand for specific use that determines the kind of feasible
investment. Moreover, the market’s absorption capacity should be analyzed, as well as the time
required to complete the investment and the costs related to the planned development of the
property. The above actions need to be undertaken by the potential investor and the valuer alike.
Thus, at the very beginning of the investment the classic HBU analysis is carried out, the result
thereof being the market value determined in relation to the optimal use.
The solution to most problems is the residual method in all its forms: the classic,
conventional residual method, which could be seen as the model of covert growth, that relies on
current costs and value (a static method), or more dynamic investment valuation methods that use
various cash-flow methods including DCF method, i.e. models of overt growth which rely on
estimated future costs and value. The fundamental principle of the residual method is that
developer’s profit (P) equals the value difference (VF) that the property will represent once the
development process and the total investment costs (C) are completed.
This can be represented by the following formula:
Formula 1: Final value – Investment costs = Investor’s Profit
Investment costs( C) = Development costs (CD) + Property purchase cost(VR)
VF – (CD + VR) = P
Thus, the property value on the date of valuation is: VR = VF – (C + P)
The basic assumption is that the investor (developer) implements improvements to the
property in order to achieve the intended profit.

16
The developer’s profit may be calculated with the use of the following methods:
static (time value of money not considered)
o Profit as margin on sales (Profit / Sale)
o Profit as the percentage of building costs or building costs + property purchase
cost or costs required for the completion of developer’s investments
o Profit as the percentage of equity (RoE – Return on Equity)
dynamic (time value of money considered)
o Profit as a function of the required rate of return from equity (RoE as IRR)
o Profit as a function of the Internal Rate of Return (IRR) of the investment
Nevertheless, it should be emphasized that the static valuation methods do not consider
the time value of money. The only element that does somehow take into account the time-span of
investment completion is financial cost (loan interest).
On the other hand, dynamic valuation methods fully encompass the impact of the
developing process on value. The value of the property in question equals the amount of the
discounted income and expenses related to the analyzed investment.
Discounting is done when the whole investment is divided into monthly periods, or more
rarely quarters, and therefore cash flows take a monthly or quarterly form.
Discounting of cash flows requires the discount rate expressed in monthly or quarterly
dimension (the principle of proportionality of rates and income).
Expanded models, including some additional tools for value management such as
sensitivity analysis, SWOT analysis or uncertainty analysis, are capable of representing the ranges
of value with the probability of obtaining a specific result in relation to input valuation data, with
regard to ranges of variables, accepted by the market, that have impact on the final result.
The outcome of the residual method does not always represent the maximum value, even
though it shows the maximum amount payable in a specific market situation and in the context of
specific market data. Therefore, valuation with the use of the comparative method, although carried
out correctly, provided a value that was too high, exceeding the maximum amount the investor
could pay. The possible reason could be the lack of possibility to accurately recognize the traits that
had influenced the prices the investors had paid for apparently similar properties; which in turn led
to the erroneous comparison of these traits with the traits of the valued property. Furthermore, this
situation may be related to the fact that the buyers paid too much for similar properties. Such
occurrences were frequent during the periods of “the financial bubble”, when investors would
desperately seek to buy property at bargain price. This is a stage of the business cycle when the
turning point is approaching and the prices will start dropping once the bubble explodes. In fact,
the prices do not drop immediately; it is the buyers who stop buying and a stage of “challenge”
ensues. Buyers have stopped buying for elevated prices, but sellers do not want to reduce the prices
and both sides keep waiting until the other yields.
Thus, the comparative method seems appropriate on the condition that all the property
prices and their mutual influences are known and that the valuer knows from which point of the
business cycle he is taking the property sale prices to be compared.
If there are any limitations to the development of the valued property or properties chosen
to be compared with regard to their possible use, they rarely would be reflected in valuations
undertaken by the comparative method. On the other hand, the residual method allows to take into
account both the advantages of a property and the disadvantages that might depreciate its value
(Adamiczka, 2011).
A regulation that permits to use the residual method only if “the existing conditions do not
allow to use the comparative or the income approach” comes from the period when the foundations
of the Polish school of valuation have been established( Regulation ,2004). Today it is damaging for
both the economy and the development of the property market in Poland. In the developed
countries (and Poland certainly belongs to this group) investment properties, particularly the
developing ones and investment land with the development potential, are valued almost exclusively
with the use of the residual method and the dynamic models of growth (DCF). Of course, it is
necessary to examine the properties that could provide a basis for comparison, and such an
analysis always constitutes the point of reference for the residual method. However, in most cases
it is the residual method that settles the market value of a specific property.
It should be emphasized that the residual method reacts to the changes in the market more
rapidly than the comparative method. It corrects the value according to the stages of the business
cycle: upwards when the market is growing, and downwards when the market is in decline, while
in the comparative method the transactions from the preceding boom would be considered. In the

17
declining market, transactions are either inflated or scarce, and thus valuers are forced to use the
data from the preceding period (Adamiczka and Chumek, 2011).
The two key issues in this case are:
1. Correct use of the residual method preceded by an in-depth transaction analysis.
2. Detailed, multi-layered market analysis that allows to recognize and define the demand and also
to find the appropriate input elements for the valuation model comprising at least some elements of
HBU analysis.
In order to understand this apparently simple principle, an example which comprises the analysis
of market value and current use value follows.

5. The empirical analysis

Valuation concerned two properties numbered as plot 15/10 and plot 15/11 belonging to
one owner, with two land and mortgage registers. The decision on the conditions of building and
site development was issued for the investment, which included an office and service building with
access roads, parking space and street furniture. The decision precisely defined the development’s
parameters.
An analysis was carried out in order to determine which use would be the most profitable
for the site and constitutes the highest and best use for the property in question.
Then, the residual method was used to determine the value resulting from the parameters
comprised in the decision on the conditions of building.
Simultaneously, current use value was estimated in two ways: the property parcel
numbered 15/10, where an office building was situated, with the use of income approach,
investment method and simple capitalization technique, and the property parcel numbered 15/11
with the use of comparative approach.

Figure 1. The area covered by the decision on building.

Source: Adamiczka, 2011.

18
 Figure 2.The research area and its surroundings.
Source: own elaboration.

Market value for the current use:

For the developed property: 20.000.000 PLN
For the undeveloped land: 6.200.000 PLN
Total: 26.200.000 PLN

The value of the alternative use defined by the decision calculated with the use of the mixed
approach and the residual method: 22.000.000 PLN
The figures show that the use proposed by the decision on building conditions is not
always the highest and best, although it might have seemed so at a first glance. In fact, the current
use is more valuable in the given market circumstances and thus remains the most profitable, and
the market value simultaneously is the current use value in this case.
The above example also demonstrates that HBU analysis needs to be undertaken
meticulously and a wide scope of factors must be considered. The residual method and valuation
within income and comparative approaches for the current use have shown that in the specific
market circumstances (rent rates possible to obtain for this area and the expenses on the
development) this decision on building conditions gives the property a lesser potential than the
current use on the date of valuation. Obviously, this situation may be subject to change when the
micro- and macro-scale market conditions, such as rates of return on alternative markets, loan
charges, building expenses and rent rates, change. The supervision of these factors can be
undertaken by sensitivity analysis, which was signaled earlier in the article. Sensitivity analysis
may help to indicate the boundary figures of input data, which make the potential of certain
alternative uses grow so considerably that an alternative use becomes the best one and settles the
market value of a prospectively developing property.

6. Conclusions
If the widespread practice advocating that current use valuation always is the estimation of
market value does not change in Poland and other countries, valuers will be encouraged to provide
inadequate results that do not reflect the real value of a property. Even though, as the practice of
valuation has shown so far, about 80% of cases prove the current use is simultaneously the highest
and best, still the remaining 20% demonstrate that the highest and best use is different than the

19
current one. Thus, market value resides in highest and best use, and current use value is a category
of non-market value. This is the way investors perceive the market and properties – valuers should
adopt this perspective as well and legal regulations should not prevent them from that.
It is market value, understood as the value for the most profitable use and usually preceded
by Highest and Best Use analysis, that shows the worth of space and enables to quantify it.
The residual method proves the most adequate in determining the value of investment
property. On the one hand, it demonstrates the potential of space and how it may be used. On the
other hand, it protects the investor from the risk of overcapitalizing when “the financial bubble”
emerges.
The above examples prove that a person attempting to evaluate property for a specific
purpose needs to possess extensive knowledge of the economy, the law and the valuation
procedures. In Poland, the professionals meeting these requirements are valuers designated by the
government authorities.
It should be noted that what greatly influences the quality and accuracy of valuations is a
comprehensive database of reliable information on property. This issue has been appreciated by
legislation. The regulations concerning land surveying and cadastre include the passages that oblige
the institutions maintaining property cadastre to provide databases related to the property market.
Moreover, surveyors of managerial posts are required to complete postgraduate studies on
property valuation.
The consequence of acknowledging the importance of evaluating space is the advanced
development of property valuation methodology. The main challenge for valuation professionals
lies in developing a deeper understanding of market globalization and better analytical skills, with a
view to assessing accurate values (Źróbek and Grzesik, 2013).

20
 Valuation methods that have been used so far do not allow to answer many questions, since
space management directly concerns people, their behaviors, motivations and purposes, which in
turn relates to economic, social and even political consequences. Therefore, the observations of
Władysław Tatarkiewicz seem sound: it is impossible to define value in an exhaustive, satisfying
way. Moreover, studies on categories of value are gradually being replaced by studies on what
people claim valuable, studies on their motivations and needs which could be fulfilled by values
(Tatarkiewicz,1978).

21
1.3. VALUATION OF PROPERTIES LEFT ON THE TERRITORY LOST
DUE TO MILITARY OPERATIONS

Abstract
The military operations that took place in twentieth century caused not only mass human
migrations, but resulted in substantial changes in the borders of involved states as well. As the
result of Second World War, Poland lost 51% of its area for the Soviet Union benefit and gained
territory that earlier belonged to Germany. The similar situations took place in other states. The
problem of compensations for lost territories was unsolved for many years in Poland. Yet, the
changes in political system enabled applying for reparations. The legal aspect and valuation
methodology in such cases are subject of publication. The long-term experiences from Poland may
be helpful for the states having similar problems.

Keywords: the lands beyond the Bug River, real estate, valuation.

1. Introduction
This chapter introduces the issues related to valuation of lands left beyond the present borders
of the Republic of Poland, called otherwise the Eastern Borders. After the Second World War, as a
result of shifting the eastern border of the State, Poland lost a substantial part of her territory in
favour of the former Lithuanian, Belarusian and Ukrainian Soviet Republics, in exchange for
enlarging the westward territory of Poland with the former German lands. The State's border
extended along Curzon line, mainly along the Bug River, therefore the term "the lands beyond the
Bug River" ("ziemie zabużańskie" was coined, and the resettled people were called the
"Borderlanders" ("Zabużanie"). These people were repatriated in the years 1944-1952 from the
Eastern Borderlands.
Rising of the claims related to the lands left beyond the Bug River results from resettlement of
Polish citizens of Polish and Jewish nationality from the territories of the Soviet Republics, and
Lithuanians, Belarusians, Rusyns and Ukrainians residing in Poland under the so-called "Republican
Agreements" (umowy republikańskie) concluded between the Polish Committee of National
Liberation (Polski Komitet Wyzwolenia Narodowego) and the Ukrainian Soviet Socialist Republic on
9 September 1944, the Byelorussian Soviet Socialist Republic on 9 September 1944 and the
Lithuanian Soviet Socialist Republic on 22 September 1944, and under the Agreement of 6 July
1945 concluded between the Provisional Government of National Unity of the Republic of Poland
and the government of the Union of Soviet Socialist Republics (the USSR), regarding the right to
change the Soviet citizenship of the people of Polish and Jewish nationality residing in the USSR and
the right to change the Polish citizenship of the people of Russian, Ukrainian, Belarusian, Rusyn and
Lithuanian nationality residing in Poland and their evacuation to the USSR.
The most important provisions of the Republican Agreement were adopted into the Polish
internal law. In the 1960s the right to compensation for the property left beyond the Bug River was
formed as the "right of offset" of the value of property left by the resettled people against: the
purchase price of a property or the fee for perpetual usufruct owned by the State. Approximately
10% of the Borderlanders have not yet received compensation for their lost property. The Act on
the right to compensation for the property left beyond the present borders of the Republic of
Poland was passed on 8 July 2005 (Journal of Laws of 2005 No. 169 item 1418), which removed
legal defects and improved the rules and procedures regarding implementation of entitlements. It
limited only disbursement of compensations to the 20% ceiling of the lost property value.

22
 Figure 1. The territory of Poland in before 1939.

2. Republican Agreements as the legal basis of claims

The Government of the Republic of Poland in exile based in London considered this as violation of
the international law regulations, including Poland, as regards the self-determination under the
Atlantic Charter, which resulted in introduction of communism in Poland and seizing rule over the
part of her territory by the Soviet Union.The decisions were taken without the representatives of
Polish government and against its will, which contradicted the principle of international
cooperation. Decision on establishing the eastern border of Poland was actually reached without
participation of the Polish side already at the Conference of the"Big Three" in Tehran between
November and December 1943.
The Republican Agreements regulated the property and personal relations of the
repatriated people. In exchange for the property left at Eastern Borderlands, the repatriates were
supposed to receive its equivalent in the Western and Northern Lands. The Polish Committee of
National Liberation stated that the professional farmers repatriated from the respective Soviet
Republics would receive lands in the size provided for by the Agriculture Reform Act. The farmers,
"even if they do not own land during repatriation, shall receive, at the request, allocation of land on
general conditions, and all other repatriated shall be provided with the conditions enabling them to
get a job corresponding to their education and qualifications". From the other hand, the Republican
Agreements provided for substantial limitations with regard to the possibility of having the
property at disposal by the persons repatriated in the territory of Poland. They could take clothing,
shoes, underwear, bedclothes, food, household appliances, rural household inventories, harnesses
and other domestic and household appliances, though, no more than two tonnes per one
repatriated family. It was also permitted to take domestic cattle and birds.
The persons holding specific professions, e.g.: workers, craftsmen, doctors, scientists, etc.
had the right to take all the tools of trade necessary for their profession practice. The ban, however,
was put on taking away cash (except for Polish Zloty in notes up to 1000 zloty per person or Soviet
money up to 1000 roubles per person), paper money, gold and silver money and any type of
securities. The ban was also imposed on taking away gold and platinum alloys, powder and scrap,
unworked precious stones, works of art, ancient works of art, being a part of collections, as well as
separate copies, unless they were owned by a family of the repatriated, weapon except for hunting
rifles and war kit, photography - except for personal photos, plans, maps, cars and motorbikes. It
was forbidden to take away furniture both by rail and by car due to transport difficulties caused by
the war time.

23
 Pursuant to the Art. 3, item 6 of each of the Agreements: "The value of the movable
property left after the evacuation, as well as the abandoned immovable properties shall be
reimbursed against an insurance assessment in compliance with the effective Acts of the Polish
State." If no insurance price was submitted, the assessment (valuation) of a property was entrusted
to Plenipotentiaries and Representatives of the Parties. It is necessary to note that there is no
reference to reimbursement of "property", but only to reimbursement of the "value" of the
property, which implicates the right of the repatriates to equivalent in cash, paid by the country
which brought them. In its further part, the Article determines that "the houses in cities and rural
areas, emptied as an effect of the resettlement, were left in the first place at the repatriates'
disposal. The left property went under the care of the State and the persons who were found guilty
of the damage made to the entrusted property could be held liable.
The procedures of reimbursement of the equivalent with the possibility of receiving
replaceable property of similar value were established on the grounds of documents gathered by an
entitled person, i.e: repatriation certificate, quantity and quality description.
Summing up, it needs to be acknowledged that the Republican Agreements regulated the
most essential issues concerning the persons repatriated and their property. They included
provisions regarding expropriation of the property owners, some of the movables, enlisting both
the items which could be taken away and these banned to be taken away. They stipulated the rules
of paying reimbursement of the left properties' value in the country receiving the repatriates on the
basis of an insurance value or appraised by the Representatives/Plenipotentiaries.
The regulations regarding reimbursement of the full value of properties granted to the
Borderlanders, except for the relevant clauses in the Republican Agreements, were passed not until
1946. The above decree in force together with the decree on agriculture reform as a first legal act
regarding the Borderlanders, conferred the right to full compensation. Similarly, all post-war legal
acts, effective together with the decree on agriculture reform, granted to the Borderlanders a full
equivalent until 2003. The decree on agriculture reform, which has been binding until now,
together with the acts regarding the equivalent reimbursement of the property value, could not be
and has not been the basis for the claims resulting from a property left beyond the Bug River. It
constituted, however, a recognized form of partial compensation for the Borderlanders.
The first legal regulation regarding execution of the entitlement - Decree of 6 September
1946 on the Agrarian System and Settlement in the Regained Territories and the former Free City
of Gdańsk was established during effectiveness period of the Republican Agreements. Hence, the
States-Parties' consent over the statutory regulation of the right to an equivalent in the internal
legal order in compliance with the aforementioned decree can be presumed.
The Republican Agreements ceased to be binding in the international trade as the
agreements between the States-Parties after conclusion of the agreement on mutual settlements in
1952. Nevertheless, as far as the internal relations concerning the settlement issues with the
Borderlanders are concerned, the post-war statutory regulations initiated by the Decree of 6
September 1946 on the Agrarian System and Settlement were binding, and the most essential
provisions regarding the entitlement to acquire the State property as an equivalent for the property
left were taken over to the Polish domestic law.

3. Legal regulations regarding the obligations resulting from the Republican

Agreements
During the post-war period the legislator frequently regulated the issues resulting from the
Republican Agreements. "The settlements" with the Borderlanders had been planned to be
completed to the half of 1957, though, they were not made as the State had to go through a next
repatriation action. On 25 March 1957 the governments of the People's Republic of Poland and the
USSR concluded an agreement on "further repatriation". Due to political reasons between the
1950s and the 1960s, no actual actions aiming to implement the Borderlanders' rights were taken.
Similarly, execution of the entitlements was occasionally initiated in the 1970s and the 1980s.
Despite the change in the political and legal system of the State during the system's transformation
and the ensuing change in the legislation towards respect of the ownership right, the attempted
legislative solutions failed to bring the desired results. Incoherent legal acts delayed the possibility
of the entitlements' implementation for many years. Initially, all claims related to the Second World
War were attempted to be covered by the Act on Re privatization. The last of the projects of the
"joint" Act on Reprivatization, intended for joint compensation of all reprivatization and Bug River
claims was passed by the Sejm and the Senate of the Republic of Poland in 2001. Nevertheless, the
Act on Reprivatization providing for compensation in the amount of 50% for the immovable

24
properties was vetoed by the President Aleksander Kwaśniewski. As an effect of the legislative
works, two new legal acts regarding only the Borderlanders were established: the Act of 12
December 2003 and the Act of 8 July 2005. Despite the opinion of the representatives of the
Ministry of Treasury, who acknowledged during the Sejm debate in 2001 that the State has the
financial resources to cover the half of the lost property, the ensuing statutory regulations
decreased drastically this equivalent (at the beginning to the amount of 15%, currently to 20%).
On 12 December 2003 a law called "The Bug River Law" was passed, which introduced the
"right of offset" of the value of property left beyond the borders of the State against: the sale price
of property or the fee for perpetual usufruct owned by the State Treasury.
"The Bug River Law" effective as of 30 January 2004 maintained the form of the
entitlements' execution adopted by the prior legal provisions - offsetting the value of the property
left beyond the borders of the State against: the sale price of property or the fee for perpetual
usufruct owned by the State Treasury. Simultaneously, the legislator introduced limitation in
respect of the amount which could be offset by the Borderlanders against the purchase price of a
property from the State Treasury, i.e. up to 15% of the value of the properties left, but not
exceeding 50,000 Polish Zloty. The limitation to 50,000 Polish Zloty applied to all beneficiaries,
irrespective of the value of the left properties. The Law stipulated that the entitlement which was
there provided shall be guaranteed to the owner of the left properties, and in case of his death -
jointly to all his heirs, if they have Polish citizenship and permanent residence in the Republic of
Poland.
The Law envisaged creation of a complete information system on the Bug River
entitlements and the execution status of theses entitlements, introducing an obligation of setting up
and conducting the information system registers at the central and voivodeship levels. The
applications for confirmation of Bug River entitlements could be submitted to the end of December
2005.
The Act of 8 July 2005 on execution of compensation rights to property left behind the
current borders of Poland was adopted on 7 October 2005.
The regulations contained in this Act meet the requirement of reliable assessment of the
entitlement's execution status. In particular, in order to prevent any abuses, the size of a partial
compensation up to the statutory granted amount of 20% executed in past, shall be included in the
certificate or the decision.
The Act introduces a two-stage affirmation of the entitlement based on an initial
affirmation of the entitlement in the form of a decision, where no prior submission of a valuation
survey is needed. The valuation survey, due to the high costs of drawing it up, should be submitted
by the Borderlanders once the application has been accepted in terms of fulfilling the requirements
set forth in the Act. It is a more beneficial form for the Borderlanders, as in the event of doubts or
refuse to confirm the entitlement, the Borderlanders shall not be encumbered with costs related to
a property valuation.

4. Disbursement of compensation for Bug River property

The final date for submission of compensation applications expired on 31 December 2008.
These applications, submitted in the relevant Voivodeship Office, shall contain documents, which
attest Polish citizenship, possession and abandonment of the property. Deeds of ownership,
notarial deeds, as well as statements of still living witnesses. The documents attesting inheritance
proceedings, conducted in respect of the owner of a property and the official descriptions of a
property or decisions passed by the former National Repatriation Office were required to be
attached as well. If there are no documents, the diplomatic offices abroad may provide assistance.
Consular Divisions of the Embassies of the Republic of Poland and Consulates General of the
Republic of Poland assists in obtaining, particularly, court documents from the archives of foreign
countries.
Disbursement of compensation for "Bug River property" covers three stages of
administrative proceedings.
1st stage - gathering and submission of documents, followed by the assessment of the
affirmed entitlement to compensation, ended with decision passed by a voivod. A valuation
surveyor draws up a property valuation after the issued decision. In this decision a voivod
acknowledges fulfilment of the conditions necessary for receiving compensation. A voivod indicates
the date of abandoning the property and he specifies the elements of left property deemed as
reliable.

25
 2nd stage - submitting valuation survey and indicating the form of compensation, which is
followed by the decision issued by a voivod.
3rd stage - entering the data in the voivodeship register and transferring it to the central
register.
The Act maintained an essential regulation referring to non-transferability of the rights to
compensation. It applies to both the right confirmed by a decision under this Act, and separate
provisions, which means decisions and certificates gained under the rule of aforementioned
preceding Acts. This principle forbids trading of "Bug River entitlements", though, it shall not
exclude transfer of the entitlements between the persons entitled in the same matter. It applies,
practically, to the possibility of assignment between members of the closest family, both co-owners
and among heirs.
The Act stipulates that all pending applications which have been submitted so far are still
honoured. Pursuant to the provisions of the Code of Administrative Proceedings, an application
opens proceedings, so in these cases it means proceedings in progress and the party - person
interested may demand its closing by a relevant decision. The Act introduced an additional
possibility to file applications by the entitled persons who have yet not done it due to different
reasons known by themselves. The final date for submission of compensation applications expired
on 31 December 2008.
Documents which should be attached to the application:
a) Evidence that affirms leaving the property beyond the present-day borders of the Republic of
Poland; this evidence may be, in particular,:
official description of the property or description of the left property or Repatriation
Certificate;
decision issued by the National Repatriation Office;
official documents, including court documents, as well as documents retrieved from the
State's archives of the Republic of Belarus, Republic of Lithuania, Russian Federation,
Ukraine or other countries;
in case of lack of documents, referred to as above, statements of two witnesses, submitted
under pain of penal liability for perjury, before a notary, body conducting the proceedings
or in a Polish consulate in the country of residence of a witness. The witness may be a
person who lived in the town/village where the left property was located or in a
neighbouring town/village, concurrently, the witness cannot be a relative (in the meaning
of the regulations on properties management) for the owners or heirs applying for
confirmation of the right to compensation.
b) The evidence which affirms having Polish citizenship:
The documents issued by the Polish authorities, which attest Polish citizenship (e.g. a copy
of an identity card);
c) The evidence which affirms an applicant's place or places of residence. In case the applicants
are heirs of deceased owners, the evidence confirming place of residence of these owners after
arriving at the present-day territory of the Republic of Poland. In case of lack of such evidence,
the applicant's statement on place or places of residence of these persons should be attached
to the application.
d) Statement of an applicant/applicants on the status of the hitherto execution of the right to
compensation, submitted under pain of penal liability for perjury,
decision on establishing acquisition of inheritance or on inheritance division. If the decision
on inheritance division does not indicate the last place of residence of the deceased owner
of the left property before his death, it is necessary to attach also the evidence confirming
the last place of residence of this person (e.g. death certificate);
e) In case of waving the rights of the entitled in favour of another person - statement on
indication of the person entitled with a signature attested by a notary or submitted before a
public administrative body or in a Polish consulate.
f) In case of prior acquisition upon separate regulations, under execution of the right to
compensation, the right of ownership or perpetual usufruct of the property owned by the State
Treasury - official documents affirming acquisition of these properties.

5. Drawing up valuation survey for the abandoned properties

It is in the interest of a "Borderlander", person applying for compensation, as well as in the
interest of the State Treasury, as the party obliged to disburse compensation, to conduct the entire
procedures provided for by the Act smoothly and without disturbances, in compliance with law,

26
logic and the art of valuation, keeping full objectivity. It means a possibly true restoration of the
historical condition of the abandoned property and a correct formulation of hypothesis of a
present-day value specified in this way, which depends entirely on a valuation surveyor.A valuation
surveyor shall start the valuation of properties abandoned in the Eastern Borderlands of the
Republic of Poland provided the following conditions are met:
a) A decision under Art. 7 of (TheAct 2005), specifying the entitled persons and their rights was
issued by a competent voivod. In this decision the voivod calls the entitled persons to select a
form of compensation and provide a valuation survey, specifying the value of the abandoned
property, drawn up by a valuation surveyor, and in case of prior using Bug River entitlements
and acquiring a property before 1998 - a valuation survey regarding this property. The
justification of the decision should refer to the documents under which the voivod accepted the
rights of the entitled persons and the elements of the property indicated by these documents.
b) The person ordering the valuation is the entitled person indicated in the Governor's decision
(one of the persons indicated therein) or the person holding the power of attorney of the
entitled person. The party ordering the valuation shall be obliged to submit a decision and the
documents referred thereto. If the voivod's decision does not indicate the documents upon
which it was issued, the ordering person shall be obliged to provide a valuation surveyor with
copies of such basic documents and a statement that the documents were submitted in the
Voivodeship Office and they are in the records of the case.
Appraisal of the value of the property left in the Eastern Borderlands shall be performed by
a valuation surveyor through a valuation survey.The content of the valuation survey should contain,
in particular, except for formal entries:
description of legal status of the appraised property,
list of data and information sources,
description of technical and utility conditions of the appraised property,
description of a local borderland "market" (the region where the property is located),
description of a comparable local domestic market,
description of the methods of the value appraisal of a property,
estimation of the value of lands and the elements of a property,
determining the value of a property,
explanation of the result,
reservations, remarks and clauses,
list of attachments.
The valuation survey may contain other additional descriptions and analyses, as needed
and at the valuation surveyor's discretion (e.g. a historical background of a heritage building).
The legal status of a property shall be specified on the grounds of agreements made by a
voivodeship body and contained in the voivod's decision. Description of a legal status includes:
designation of a property owner and the date of abandoning his property as a result of
circumstances related to war and occupation,
designation of persons who hold the entitlements currently.
If the decision does not indicate the person of a former owner and the date of the
property's abandonment, and it only refers to the currently entitled persons - the answers to the
issue presented in item 1 should be searched in the basic documents; "repatriation certificate" or a
decision of the Polish Repatriation Office would be particularly helpful there.
A valuation surveyor, except for the aforementioned circumstances, shall not investigate
the inheritance rights and other economic rights on his own.

5.1. List of data and information sources

The list of data and information sources shall include all basic and auxiliary documents, as well as
maps and literature including information about the property and its neighbouring areas
(town/village, poviat, gmina, geographic region), which provide a correct envision of a property
and its neighbouring area.

5.2. Description of technical and utility conditions of the appraised property

The subject of a valuation (abandoned property), described at the beginning of a valuation survey
(section of formal and legal basis) contains the details specified in the decision of a voivod. If the
decision does not contain a description of a property - the data are taken from basic documents.
Description of a technical condition and the use condition of the abandoned property is
more thorough and detailed from the description of the subject of valuation. The characteristics of a

27
property is extended and further specified with the data and information included in auxiliary
documents and with adopted assumptions, explaining their essence and logic justification. It is not
allowed, though, to introduce new elements of a property going beyond the list arising out of the
basic document and included in the decision.
Hence, if there is a record in the decision (made under the decision of the Polish
Repatriation Office) that a dwelling house constituted a part of an agricultural property (and only
this), it is assumed, in the result of an analysis of similar properties in a similar region, where the
characteristics included in the documents was more in-depth, that this house was similar to the
above mentioned as well; so the number of rooms is converted into measurement, assuming the
average most probable size of a room. The same applies to other components of the appraised
property. All these speculations should be included in a valuation survey.

5.3. Description of the Borderland market

The description of so-called Borderland market - the neighbouring area of the appraised property,
depending on its type, relates to a city, gmina, poviat or a geographic region (the proper
characteristic part of a voivodeship). The characteristics of a whole voivodeship is unnecessary, as
the choice of a comparable voivodeship was determined by the Act and searching for a similarity
feature is groundless.
The description, whose level of details depends on the available and possessed data and
information, includes these elements, which can be also identified on a comparable domestic
market and which have an essential influence on the value of a property. The description is not
extended with the features insignificant for the valuation process.

5.4. Comparable domestic market

It is a local market of a given type of property in the area of a comparable voivodeship, similar to
the area where the appraised Bug River property is located. For Cracow and Lublin (equivalents of
Lwów and Wilno) this market is the similar city zone.
The description should include the characteristics of an area, referred to in the description
of Borderland market (they condition fulfilling the comparability criterion). The description of a
domestic market, though, is also the characteristics of this market in the economic aspect.

5.5. Description of the methodology of the value appraisal of a property

The description of the methodology should shortly characterize their essential features and contain
justification provided for by law provisions or the rules of professional standards. Methodology
should be specified separately for each type of component or functional parts of the appraised
property. When it is necessary to move from the rules specified in the standards and use the
author's methodical variant, it should be justified both in the subject-matter aspect (particular
position of a property and market) and from the purposefulness and logic of the proceedings' side.
The description of methodology should contain these features which will be used in the
process of calculation of the value of a given element of a property (component or functional part),
and any embellishments and general methodological descriptions should be avoided.

5.6. Appraisal of the value of lands and the elements of a property

Appraisal of a property value should be made separately for each of its component and functional
parts, and so it should be included in a valuation survey. It is necessary to present a process of a
calculation procedure and define clearly the value of an element received as a result of this
procedure.
The databases, used for the calculations may be indicated in this part of a valuation survey
or they may constitute relevant attachments. It is clear from the norm contained in (The Act 2005)
that after calculating the values of separate elements of a property, the summary should be put in
the survey, and the sum of all values should be multiplied by a relevant Borderland coefficient.

5.7. Justification of a result

Justification of the reached result, confirming probability of the value calculated under this method,
should be placed directly after a clause determining the value of a property. As it was
aforementioned, it is possible to apply different methods, data and information, though, it is always
necessary to check the content of adopted base of transaction prices, defined by the relation of
average price to a database range, which should satisfy the inequality: ΔC<Cmean

28
5.8. List of attachments
The valuation survey should be accompanied by copies of all basic and auxiliary documents, used in
the study. It is possible and desired to attach maps which contain indication of a property location,
Borderland market and a comparable local domestic market. In case of Lwów and Wilno, these
should be copies of relevant section of the city plans where the location of a property is indicated.
Photographs should be also attached, insofar as they illustrate the state of a property from the
period prior to abandonment.

5.9. Forms of compensation

(The Act 2005) provides for two forms of compensation. The first one is, principally, continuation
of the current form, i.e. the right of offset of the value of compensation against: the properties
purchased from the State Treasury, including:
a) the sales price of the property ownership,
b) the sales price of perpetual usufruct right owned by the State Treasury,
c) fees for perpetual usufruct of land and the sales of its components,
d) fees for transforming the perpetual usufruct into ownership right.
The second form is beneficial for the persons interested in the novelty introduced by the
Act - it is a form of financial compensation. The compensation in each of these forms is executed in
the amount of 20% of the value of the abandoned properties, and the choice of a form depends on
the will of the eligible persons. Restriction of the compensation to the amount of 1/5 of the value of
a property should be justified by its "aid", not "compensation" character.

6. Conclusions
It should be stated that valuation of an abandoned property is a much longer process and it
is more complex from typical property valuations. A valuation surveyor must determine a
comparable local market in the territory of the Republic of Poland, gather the transaction data and
conduct an analysis of this market. An initial appraisal of a value of a property acquired earlier in
respect of the held Bug River entitlements should be made, taking into account that this value
lowers the compensation due equal to 20% of the value of the abandoned property.
The Internet often becomes the only source of information, which provides characteristics
of a town/village. In case of bigger towns, it is possible to receive a lot of important information,
such as old maps of a location.
The abandoned properties were usually farms. At the local property markets there is
generally no transactions, whose objects would be the farms, as these are less-developed or
moderately-developed markets. In the notarial deeds it is difficult to find transactions of a similar
farm structure, i.e. of the type of a building, used building materials, distance from access roads,
structure of lands and agricultural lands and the mutual relation of buildings area to agricultural
and forest lands.
The Act provides for the aforementioned situation (Art. 11, item 4) and it permits to
determine the replacement value of the building structures, buildings or part of these buildings.
Therefore, during valuation of an abandoned property the two approaches are
implemented: a comparable approach for a land valuation and a cost approach for building
structures, buildings or their components.
In case of the cost approach, the problems encountered by property surveyors are finding a
suitable building in available price lists and determining a relevant degree of wear and tear.
Technology of construction has changed a lot. In the pre-war times these were predominantly wood
constructions, on a stone base, roofs covered with straw or shingles, while currently buildings are
made in a traditional brick technology, with roof-tile or metal roof covering. Using the current price
lists, there is a need to include a correction, inter alia, in respect of using other materials,
equipment or lack of installation, roof covering with a roof angle correction.
Value of a property left beyond the borders of the Republic of Poland should be estimated
according to the property's condition on a day of abandonment or according to prices or
replacement costs on a day of drawing up the valuation.

29
30
2. METHODICAL ASPECTS OF PROPERTY MARKET
ANALYSIS

31
32
 2.1. PREDICTION OF TRANSACTION PRICES WITH USING OF
TIME SERIES*

Abstract
Evaluating real estate market value by comparative and mixed approach, certified property valuers
rely on opinion made by themselves, concerning transactions contracted in the past. So, they have
to manage to correct transaction unit prices to the date of performed appraisal. Thus, their task is
to determine changeability of similar real estate prices, being result of time flow, for individual
analyzed real estate market.
There are two ways of considering influence of time on real estate value. One of them is time
correction made before prices have been corrected, regarding other market features. Then,
corrected transaction unit prices taking into account time, are used (for example in interval model
or linear regression). One can also consider time, which passed by from the date of transaction,
directly for local market statistic analysis, as one of features by means both real estate, recorded in
database and evaluated real estate, can be described.
Yet, authors propose to make correction of transaction prices in another way. They suggest to
add to list of statistical methods a method of analysis time series. In such case, passing time one
should perceive as set of subsequent, equal intervals. For the purpose of performed analyses they
are following months, as passed from date of the first transaction recorded in database of analyzed
real estate. Transaction prices have been assigned to such interval. Created in that way series can
be analyzed in order to determine trends of changeability of real estate prices.
Mentioned above theses have been verified for undeveloped, land real estate, located in
Michalowice commune, Krakow district, Malopolska region, which are expected in land use plan as
low housing.

Keywords: prices changes in time, forecasting, time series, transaction prices

1. Introduction
The market value of property can be determined using a comparative approach, income approach
or mixed approach (Act, 1997), (Ordinance, 2004). The valuation performed by a valuer is based on
the data derived from the market. Most transactional prices or rate of rental or lease are used to
determine projected income generated by the property. Information on prices and tariffs resulting
from contracts concluded at different times in the past must be corrected to the date of valuation.
The transformation should be based on market trends, therefore it is necessary to designate the
direction of changes within a certain time (Czaja, 2001). This period should precede the valuation
date immediately and in accordance with the guidelines laid down in Widespread National
Valuation Principles (Interpretative Note No 1) it should not exceed two years (The Note, 2008).
However, exception from this rule may be allowed.
The most popular method to correct the transaction prices is interval model. However, it
requires collecting database of similar real estates, where at least four have the same attributes as
the property valued (Czaja, 2001). This method, and a number of others, are widely discussed in the
literature, including (Budzyński, 2010) (Czaja, 2001), (Klajn, 2007), (Frukacz et al., 2012).
There is also another way to incorporate time change in the valuation process. You can treat
time as attribute and determine its impact on volatility of property prices.
The authors, knowing the opinions (Adamczewski, 2006), (Pawlukowicz, 2003), (Trojanek,
2011), (Wisniewski, 2011) of cyclical nature of property prices on local markets, are trying to join
the methods mentioned above - time series analysis. The authors want to take into account in
determining the temporal trend the largest number of real estate without having to describe their
attributes.

2. The subject of analysis and data sources

Analyses were carried out on the basis of collected data on undeveloped lands in Michalowice
commune5, Krakow district, Malopolska region. The commune consists of 18 villages : Firlejow,
GornaWies, Konczyce, Kozierow, Ksiazniczki, Maslomiaca, Michalowice, Mlodziejowice,

5 Commune is the smallest unit of administrative partition in Poland (Act, 1998).

33
Pielgrzymowice, Prawda, Raciborowice, Sieborowice, Wieclawice, Wilczkowice, WolaWieclawska,
Zagorzyce, Zdzieslawice, Zerwana.
Commune Michalowice occupies the area of about 50 km2 and it is inhabited by over 9 thousand
inhabitants. It is located about 10 km from the historic centre of Krakow
(www.michalowice.malopolska.pl). Location of the commune is shown at the figure 1.

Figure 1.Location of Michalowice commune

Source: Own study based on (www.geoportal.gov.pl)

Source of information was the register of prices and values of real estates6. The first recorded
transaction took place on 4 January 2008, the last - 21 December 2012. The information about 259
real estate transactions was extracted from the register of prices and values of real estates. All real
estates were marked in land use plan7 as detached houses or areas offarm buildings. The basic
characteristics of this database contains table 1.

Table 1
Characteristics of the analyzed base
number of transactions average median minimum maximum standard deviation

259 128.41 116.82 26.92 332.43 54.88

Source: Own Study

In order to illustrate the data in figures 2, 3 and 4 better: the histogram unit transaction prices
recorded for analysis of real estate in Michalowice, in the years 2008÷2012, the correlation of unit
transaction prices and time of transaction and number of transactions and the average transaction
price of a unit divided into years were presented there.

6 A register of prices and values of estates is run on the basis of (Ordinance, 2001). It contains:
‒ transaction prices, recorded in authenticated deeds, delivered to cadastral office in order to insert changes in cadastre (for
example: change of owner as an effect of purchase-sell contract),
‒ real estate values determined by professional valuers in valuation reports and abstracts from them are delivered to
cadastral offices (Act, 1997).
7 There are three levels of spatial planning in Poland (Act, 2003): country, regional and local. The last is run in the area of

commune. There are two planning documents made on local level: study plan (worked out at scales 1:10000 or 1:25000),
showing general planned purposes and land use plan (worked out at large scales, for example 1:1000), showing these
purposes in details. Study plan is prepared for the whole commune, and it is compulsory. Land use plan, in turn, is prepared
on the basis of study plan. Land use plan makes local law and is the basis for all investments being carried out in the
commune area.

34
 Figure 2.Histogram of unit transaction prices in Michalowice (2008÷2012)
Source: Own study

Figure 3.Correlation of unit transaction price and time, r = - 0.13, p = 0.95

Source: Own study

Figure 4.Number of transactions and average unit transaction price in Michalowice (2008÷2012)
Source: Own study

Figure 2 clearly shows that, although highest and lowest prices are in minority, the histogram of
unit prices doesn't show signs of normal distribution. Transaction prices near to the average price
(128.41 PLN/m2) are less than the prices in neighbouring intervals.

35
 Unit prices are not correlated with the time of the transaction (Figure 3). Pearson product-
moment correlation coefficient is negative (r = - 0.13) and suggesting a decrease in prices over the
five years analyzed. This is consistent with the generally prevailing real estate market trends.
The more transactions were observed each year, the higher average unit transaction price was.
The impact on this situation was largely shaped by the demand in the mortgage markets each year.

3. Selected methods of forecasting

The time series can be divided into two ways. The first partition will be dependent on the type of
data that make the time series. The basic types of time series will include:
‒ one-dimensional time series, which is a string of states of one variable observed, ordered by the
time;
‒ multidimensional time series, which is the string of several variables describing the specified
object;
‒ one-dimensional series of cross-cutting, which is the string of states of one variable observed,
relating to the same period or moment, for a variety of spatial objects;
‒ multidimensional series of cross-cutting, which is created by cross-cutting ranks of many
variables considered in one moment or period.
The second partition will depend on the way of connecting the components of time series
(Figure 5) and is as follows:
‒ additive, with constant fluctuations;
‒ multiplicative, with fluctuations proportional to the scale;
‒ additive-multiplicative.

Figure 5.Components of time series

Source: Own study based on (Box and Jenkins, 1983), (Brockwell and Davis, 1996),
(Hamilton, 1994)

The above components of time series can be described as follows:

‒ trend, that is the propensity for one-way changes (increase or decrease) of the value of the test
variable;
‒ constant level, when the values of the predicted variable oscillate around one, a constant level;
‒ cyclic fluctuations in the form of long-term and rhythmic movements in the value of the variable
around the development trend or a constant level variable;
‒ seasonal fluctuations, that are fluctuations observed around trend or the constant level of
variable.

They are presented in Figure 6.

36
 Figure 6.Components of time series
Source: Own study based on (Box and Jenkins, 1983), (Brockwell and Davis, 1996),
(Hamilton, 1994)

The existence of the components of time series can be identified in a very simple way. It is
sufficient to analyze the shape of chart and then confirm assumptions as follows:
‒ for the trend to designate Pearson product-moment correlation coefficient;
‒ for the seasonality perform analysis of variance, putting the hypothesis of equal average value.
Knowing type of time series and time of forecasting, we can to choose the correct method of
analysis. Summary of the most important methods is listed in table 2.

Table 2
Methods for forecasting time series
Method of Components of Time of
Characteristics of method
forecasting time series estimates
simple calculations, quick
naive
forecast, poor quality of forecasts
moving averages
constant level
weighted moving
and random one period simple calculations, quick
average
fluctuations forecast, difficulties in selection
exponential
of the parameters
smoothing -
simple model

37
 Method of Components of Time of
Characteristics of method
forecasting time series estimates
exponential
short-term flexibility, difficulties in selection
smoothing –
forecast of the parameters
Holt Model
trend and simple calculations, ability to
linear regression
random determine forecast error
fluctuations ability to determine forecast
creeping trend forecast short
error, adapting to the trend,
with harmonic and medium-
complex calculations, difficulties
weights term
in selection of the parameters
indicators ability to determine forecast
method error, complex calculations
ability to determine forecast
exponential
short-term error, complex calculations,
smoothing –
forecast difficulties in selection of the
Winters model
parameters
constant level or
good quality of forecasts, analysis
trend and forecast short
of large data sets, time series
ARIMA random and medium-
must be stationary, difficulties in
fluctuations and term
selection of the parameters
seasonal
method of ability to determine forecast
fluctuations short-term
singularity error, difficulties in selection of
forecast
periods the parameters
forecast short
harmonic ability to determine forecast
and medium-
analysis error, complex calculations
term
Source:Own study on based (Box and Jenkins, 1983), (Brockwell and Davis, 1996),
(Hamilton, 1994)

In order to be able to analyze the time series properly, its elements must meet the following
criteria (Pawlukowicz, 2009):
‒ time series must be homogeneous (data in periods or in moment);
‒ units of time must be equal (equal interval between the moments or equal time interval);
‒ the period of analysis must include the range for which the same reasons have influence on the
explored phenomenon.

4. Time series data for average prices and forecasting

Time is the very important factor in the analysis of real estate prices. Time can be represented as
the collection of successively distant points. There have been splitted for periods of equal months to
illustrate time series for transaction prices. It was calculated basing average prices in each month.
Time series for average prices are shown in the figure 7.
At the beginning the proper assessment of the process based on figures important. It is not
always possible to identify a trend or seasonality on the basis of the original chart. It may be helpful
to smooth a time series to extract trend and seasonality.
Time series smoothing is made using mechanical methods – moving average. The results are
shown in figure 8.
On the basis of figures it can be formulated requests. Decreasing trend can be shown. In
addition, from August to October of each year there is an increase of real estate unit prices. In turn,
from December to April it is the decline in average unit prices of real estate. Such trends have been
shown on the example data set analyzed, including average prices in Michalowice in the period
2008÷2012.

38
 Plot of v ariable:
av erage price per unit [PLN/m^2]
200 220

200
180

180

average price per unit [PLN/m^2] 160

160

140 140

120 120

100
100
80

80
60

60 40
01/2008

05/2008

09/2008

01/2009

05/2009

09/2009

01/2010

05/2010

09/2010

01/2011

05/2011

09/2011

01/2012

05/2012

09/2012
time

Figure 7.Plot of variable: average price per unit in Michalowice (2008÷2012)

Source: Own study

Plot of v ariable:
av erage price per unit [PLN/m^2]
mov ing av erage
200 150

145
180

140
average price per unit [PLN/m^2]

160
135

140 130

120 125

120
100
115

80
110

60 105
01/2008

05/2008

09/2008

01/2009

05/2009

09/2009

01/2010

05/2010

09/2010

01/2011

05/2011

09/2011

time

Figure 8.Plot of variable: average price per unit in Michalowice (2008÷2012)

(smoothing – moving average)
Source: Own study

Further analysis has been carried out taking into account the perceived correctness. The best fit
was the analytical time series model with trend. Smoothing additive model is illustrated in figure 9.

39
 Smoothing additiv e model
av erage price per unit
av erage price per unit
smoothed time series
200 200

180 180

160 160
average price per unit:

140 140

120 120

100 100

80 80

60 60
01/2008

09/2008

05/2009

01/2010

09/2010

05/2011

01/2012

09/2012

05/2013

01/2014
time

Figure 9.Smoothing additive model for average price per unit in Michalowice (2008÷2012)
(with time series forecasting)
Source: Own study

The authors have forecasted the average prices in the following months on the basis of the
additive model. The average transaction price per unit adjusted for December 2012 is 114.09
PLN/m2. Forecasted prices in subsequent months shall be on a similar level.

5. Linear regression model for the trend of changes in transaction prices in

time
To compare the results obtained from the analysis of time series, the regression model has been
selected. It is the model that can be used for price adjustments in the collection containing property
with similar attributes, in which transactions are shifted relatively to each other by at least 12
months (Czaja, 2001). Valuation date should not be later than 3 months from the last transaction in
the database (here: December 2012).
It has been decided to extend the time period for analysis with the prescribed two years (The
Note, 2008) to five. This is due to do the lack of clear trend and seasonality in the created database
and the length of period during which the appointed time series is created.
In order to determine the trend of changes in transaction prices in Michalowice, in the years
2008÷2012, average and standard deviations for unit transactional prices and time were
designated. They are presented in table no. 3. The table also contains information about prices
corrected on December 2012.

Table 3
Average and standard deviation of transaction prices and time
average standard deviation

unit transaction prices [PLN/m2] 128.41 54.88

time [months] 25.14 17.76

adjusted unit prices the transaction – December 2012
114.24 54.40
[PLN/m2]
Source:Own Study

40
 The price was transformed at the time using formula (1) and (2):
(c )
B r 0.4065 (1)
(t )
c iSK c i B (t W t i ) (2)
This means that the average unit transaction price adjusted for December 2012 is 114.24
PLN/m2. This value in each month decreases for almost 0.41 PLN/m 2. It seems that extrapolated
values can be compared with the values obtained in the analysis of time series.

6. Conclusions
To sum up, one should express the following statements:
1. Tested data in its original form don't meet basic criteria, that should be met by time series for
their proper analysis. Time series of unit transaction prices have homogeneous character (the
information in the registers of prices and values are delivered for specific moments – the day of
the notarial deed signing or the valuation day), so the units of time are not equal. Therefore, it
was decided to designate the arithmetic average of transaction prices in individual months. This
led to the creation of a time series consisting of values assigned to the same space of time (one
month). It was assumed that in the years 2008÷2012 real estates in Michalowice were sold in
similar conditions.
2. The linear regression model, which is listed as one of the time series analysis methods , is used
in the valuation of real estates to determine trend changes in transaction prices in time. Because
it is a way to forecasting, on the basis of data sets with a clear trend with possible random
fluctuations, it doesn't work in the case of large disparate databases.
3. Projected prices are similar in both time series and linear regression model prediction. In the
case of seasonality forecasting on the basis of the time series, which take into account the trend
and also seasonality, it seems reasonable.

* This work is financed from the funds for science, no 11.11.150.006, realized at AGH University of Science and
Technology, Faculty of Mining Surveying and Environmental Engineering, Department of Geomatics, allocated
for the year 2013.

41
 2.2. THE INFLUENCE OF ADMINISTRATIVE DECISIONS ON THE
DEVELOPMENT OF COMMERCIAL – RETAIL PROPERTIES MARKET

Abstract:
Administrative decisions of local authorities units bear a substantial impact on the
development of commercial properties. A local authority has the greatest actual power through
land-use policy development. It is an only field where a local authority can, almost freely, influence
on the development of local communities. Proper decisions may lead to sustainable development
and satisfaction among local communities. The wrong ones result, in turn, in destruction and
personal tragedies of the participants of the real estate market. The author using as an example a
town with 38 thousand inhabitants located in Podkarpackie Province, Poland, demonstrates
irreversible effects, brought about as a result of amendments to the local law (Spatial Development
Plan), on the development of real estate market. The research covers the period between 1998-
2013. At the beginning of the analysed period there was hardly any real estate market. The rate of
return did not exceed 7 years at good locations. There are examples of return on the expenditures
made for building a store even within 5-year period.
As the revenue generated from the commercial facilities lease was so high, there was nobody
interested in commercial properties sales at the end of the 90s of the last century. High rents had
their impact on a continuous and stable development of commercial properties market. The
analysed town was practically a trade centre for a whole district with the population of 120
thousand inhabitants. Therefore, as far as the author knows, there were no cases of bankruptcy of
the companies conducting their businesses reasonably. After Poland acceded to the EU and the
right to locate large-format stores within the area of cities was liberalized, an influx of newly
developed stores began. The retail space equal to 30 thousand m2 in 1998 was successively
enlarged by a few thousand m2 on average each year, so that in 2006 it reached approximately 60
thousand m2. Since 2007 there has been an unprecedented development of hypermarket chains,
which led to a surfeit of retail space and a drastic drop in profitability of sales for the family
businesses. In 1998 there have been registered over 2500 companies conducting commercial
activities. After 2010 there were approximately 1500 people, mainly from small companies, who
were at risk of job loss. In the forthcoming period, next large-format stores of a total space over 40
thousand m2 are planned to be opened. It will bring a very strong disproportion between the
supply and demand relations at the real estate market. Finally, it will lead to a change in the utility
function of a number of shops adopting them to, for instance, apartments.
The ongoing changes at the real estate market in the analysed town have an unusually
interesting research thread. The work shows transformations at the commercial properties market
from the undeveloped phase of the market, through subsequent development phases, up to the
phase of complete surfeit and the evident oversupply in relation to demand at the local market.
Furthermore, the author considers an extremely significant issue, namely, the current social
changes among local communities.

Keywords:real estate market analysis, commercial properties market.

42
1. The analysis of real estate market as an element of decision-taking in urban
policy-making process

A process of capital concentration and crowding-out home trade by foreign retail chains has
been observed in Poland for a couple of years. [Wilk 2005]. The state and local authorities,
believing uncritically in the free market actions, have failed to duly protect the mechanisms serving
sustainable development [Woźny 2007]. Local authorities, particularly, are appointed to create a
right spatial, size and industry structure of trade wtihin their territories. The element necessary for
taking optimal planning decisions is conducting a constant monitoring and analyses of trade
development [Wyżnikiewicz et al. 2006]. A properly conducted monitoring research may be a basis
for a harmonious spatial management within the territory of a given local authority. Above all, land
consumption, traffic and the social impact of opening new stores should be taken into account
during planning works [Bieleninik, Mikuś 2005].
The basic prerequisite for planning a new store construction shall be an analysis of retail
space saturation within a given city and the social expectations of its inhabitants. Domański [2005]
170 underlines that a modern shopping centre is a "product" of a new generation. A wide choice of
goods and services is accompanied by an alluring architectural and urban space. Therefore,
competitiveness of new stores is considerably greater than of the traditional trade. The basic
planning document for conducting a local authority's planning policy is a Study of the Conditions
and Directions of the Spatial Management of a Commune. The Act of 27 March 2003 on Spatial
Planning and Management (Journal of Laws, No. 80, item 717) refers to covering in the Study of the
Conditions the following elements: influencing the inhabitants' quality of life (item 1.5), public
purpose investments of local and supra-local importance (item 2.6 and 2.7) and the conditions of
building commercial facilities of the sales space over 2000 m 2 (item 2.8). The problems of trade
locations and their functioning are regulated, to some extent, by the Regulation of the Minister of
Infrastructure on the scope of the Study's Project of the Conditions and Directions of the Spatial
Management of a Commune (Journal of Laws No. 118, item 1233). In the aforementioned legal acts,
it is recommended to prepare an analysis on the functioning of essential subject issues, from a
social and given local authority's point of view, and to define financial effects for a local authority.
In order to achieve a required spatial order and sustainable development in the area covered
by the study, urban indicators should be prepared. These indicators should constitute a basis for
defining the size and type of building-up. As the legislator did not impose strict standards for
commercial facilities in this scope, each local authority should define them on the basis of
commonly adopted standards and local conditions. The basic and fundamental document, which
should be drawn up by local authorities for the purpose of reaching sustainable development of
commercial areas is the document called Local Plans of Trade Development. These plans should
contain a detailed description of a present (initial) condition and a forecast of planned changes, as
well as defining financial effects on a local authority and home trade. Once they have been adopted,
the local plans of trade development and of other spheres of economic life in the area of a local
authority become an integral part of a local authority's strategy of development or local
development plans. According to Kaczmarek [2010], "reasonable and effective spatial planning
requires drawing up forecasts on the basic urban functions and land use forms. It concerns, in
particular, these forms which considerably influence not only the spatial layout, but also economy
and a social urban life, and, as a consequence, functioning of the whole urban organism and its
environment".
Urban indicators should be prepared after carrying out a detailed analysis of real estate
market. Property surveyors are obliged to conduct such an analysis for each valuation surveys. In
order to take a correct planning decision, designers should have knowledge on the social and
economic conditions of the analysed location and the nearest area. [Bywalec 2003]. A detailed
analysis of the real estate market shows supply to demand relations and it provides a lot of
important information necessary for taking planning decisions. Combination of information gained
from the analysis of real estate market with planning objectives should be reflected in a local plan
of trade development.

43
2. Local plans of trade development

A local plan of trade development constitutes a basic planning document, which allows to
determine optimal retail space in the urban area. Scientific research showed that the optimal retail
space per one inhabitant is limited, above all, by purchasing power of a potential customer and
unemployment rate.[Kaczmarek T. 2010 a and b.]. It is not constant. It is estimated that for reach
countries of the EU the retail space per one inhabitant should not exceed 2 m2. Taking into account
the purchasing power of a Polish consumer [Wilk 2005], the optimal retail space per one inhabitant
should be between 1.0-1.2 m2 for large urban agglomerations and between 0.7-0.8 m2 for areas of
lower incomes. While conducting any type of analyses, it is necessary to remember that the total
retail spaces reported by consultancy companies and publications differ substantially between each
other. These companies sometimes refer to building-up space or total space. There are studies
where a utility space or space for lease are indicated. This state of affairs gives distorted pictures in
the market analyses, particularly if the analysed spaces were not correctly defined. A lot of
controversies may arise out of including the space of detached buildings located near the large-
format stores. It frequently happens that the facilities are not directly connected with the business
activity of the large-format stores. The residential zone of potential buyers, which is under the
analysis as well, gives rise to numerous difficulties in the interpretation of the results. Some
research include only inhabitants of a given city, in other research cities and a few neighbouring
areas are considered, while another one includes inhabitants of cities and a district. Depending on
the way of defining the indicator, different levels of saturation may be received, which, as a
consequence, gives considerably different final results. In this study, the results of retail spaces
have been taken on the basis of the issued building permits and the Land Development Conditions
Decision for Commercial Buildings, as well as on the grounds of photographic inventory. The effects
of administrative decisions on the shifts of supply and demand at the real estate market have been
presented by taking as an example the Town of Jaroslaw, located in Podkarpackie Province, Poland.

Figure 1.Total retail space in Jaroslaw in the years 2000-2014 in thousand m2

Source: author's work

The summary of retail spaces in the years 2000-2014 prepared on the basis of the issued
building permits and the Land Development Conditions Decisions has been complemented by a
survey conducted among the shopkeepers of Jaroslaw. It is possible to divide trade in Jaroslaw in
the years 2000-2014 into several periods on the grounds of conversations and interviews with the
shopkeepers. The shopkeepers see the period between 2000 and 2007 as a good time when they
were getting satisfying profitability. In the period between 2008 and 2011 the shopkeepers did not
gain profitability at the satisfying level, which effected in employees' dismissals and working as
sales assistants by the shop owners themselves. Since 2012 over a half of the shopkeepers assume
that the incomes gained in the last months force them to take a decision on dissolution of their

44
businesses. Since 2013 there has been an increase in the number of vacancies at the commercial
property market, particularly in the trade sector. There have been massive re-negotiations of the
rent amount with the owners' of the premises. The discounts in this respect reach even 50%. The
lack of any perspective for employment of the home shops owners delays the decision on
dissolution of their businesses. In the context of such a difficult position of the local shopkeepers,
the decision to build next large-format stores of a total space over 40 thousand m2 in the
forthcoming years will lead to a massive wave of bankruptcies in the home trade. The author
estimates that only every fourth shop has a chance bigger than 50% to survive on the market.
The next important parameters while taking planning decisions should be maps and charts
showing quality and quantity structure of the trade within the area of a given city with
consideration of demographic projections. In case of a small number of inhabitants per one shop,
the drastic change in the structure of retail space, caused by opening a retail chain in the given area,
may lead to social tensions and closing small shops. The town of Jaroslaw stands as a particular
example of the above situation. For many centuries Jaroslaw has been known as a mercantile town.
Its development and a high social status of merchants resulted from its location along the trade
routes and the right to store commodities. The town has thrived on trade for many centuries. The
common assumption that conducting business activity is a synonym of prosperity led to the
situation when there were 2,5 thousand economic entities registered in the town having a
population of 35 thousand of inhabitants [Dąbrowski. 2010]. Photographic inventory showed there
were over 400 shops in Jaroslaw in May 2013.
In comparison to Warsaw, the statistical number of persons "maintaining: one shop is considerably
lower.

(Warsaw) (Jaroslaw)

Figure 2. Number of inhabitants per one shop in Warsaw and in Jaroslaw

Source: author's work

The summary of a number of inhabitants per one shop drives to the conclusion that the local
trade market is completely "overheated". The situation when 95 statistical inhabitants of the town
of Jaroslaw maintains one shop is economically entirely unreasonable. The realignment in the
number of shops will ensue in the forthcoming years. If in the town having 38 thousand of
inhabitants there are over 400 shops, 78 hairdresser's establishments and several dozen chemist's
establishments, it indicates, on one hand, the complete shortage of basic monitoring of economic
area by the local authority, and on the other hand, the business owners' activities without a due
estimation of the real needs of the market. The lack of any representatives of the town's
shopowners when planning decisions on the location of hypermarkets in the urban space are taken,
shows, on one hand, failure to associate by the interested parties themselves, on the other hand, a
lack of proper analyses. Carrying out basic economic and urban analyses should protect against
spontaneous development of public space. Jaroslaw stands as an example of a town where
traditional forms of neighbourhood trade, bazaars and markets should be maintained due to
growing social stratification and ageing of the society. Locating large-format trade in the places of a

45
high concentration of small shops will evoke a big wave of public outrage and elimination of a
substantial part of the local middle class. Keeping a balance between the traditional and modern
trade is one of the most essential tasks for the local authorities in the town of so strong historic
conditions.

3. Theoretical assumptions for creation of local plans of trade development

based on the analysis of the real estate market.

The changing reality imposes adjusting activities to current needs [Makowski 2003].
Development and the advances in the economic sciences caused that the research and analyses
conducted commonly a few years ago are no longer sufficient to take current decisions. The rules of
creating plans of trade development should be established by the local authorities on the grounds
of literature and common practice. Such plans should not be developed on ad hoc basis and under
the pressure of a potential investor. The situation when the plans are prepared for the money of a
potential investor who chooses a company to carry out the work is entirely unacceptable. In that
situation it is not possible to expect high reliability of the achieved results. According to the
author, adopting a trade development plan by a local authority should be preceded by a
traditional analysis of urban indicators described in the literature and in-depth analysis of the real
estate market. By the in-depth real estate analysis the author means the analysis of social and
economic indicators, the interplay of supply and demand at the real estate market and the analysis
of thematic maps with their statistics. Therefore, while planning a large-format store by a local
authority, the same research that is carried out by investors should be made, albeit extended with
the analysis of financial effects on the home trade and local community. In this context, a plan of
trade development of a local authority unit should contain fixed elements (obligatory) and optional,
so resulting from local conditions.

The basic obligatory elements of a plan of trade development exemplified by the town of Jaroslaw

3.1 The map of existing spaces of commercial facilities (retail).

Source: M. Furman, E. Dębniak, J. Dąbrowski

The map contains the locations of commercial facilities with the lease space. Using it is possible to
assess visually the saturation of retail spaces.

46
3.2 The map of lease prices of retail spaces for 1m2
Source: M. Furman, E. Dębniak, J. Dąbrowski

The map of lease prices for 1m2 in Jaroslaw reflects supply to demand relations at the
commercial property market.

3.3 The summary of retail spaces in consecutive years: total, per capita, vacancies, average offer
prices for a given standard and location.
3.4 Inventory of commercial facilities The inventory should be performed on the basis of a
cadastre , and in order to determine the facts a photographic inventory should be carried
out.

(The zones of retail centres influence i, j, k and the indifference zone)

3.5 Maps of indifference zones for chosen newly projected locations for p > 0,5
Source: E. Bieleninik, J. Mikuś, Prognoza warunkowa zasięgu handlowego rynku
(Conditional forecasting of the market trade zones), Wrocław: 2005.

47
 On the basis of the map of indifference zones it is possible to determine which of the
existing commercial facilities will be put at risk after the completion of a new investment.
3.6 The analysis of financial effects related to location of a large-format store on the existing
trade and local community.
Basing on the devised plan of trade development containing the elements enlisted
above, a local authority increases considerably probability of taking an optimal decision.
Local Spatial Development Plan (LSDP) is a basic and general attribute of exercising
governance by a local authority. There are a lot of elements which exercise a real influence
on the development of public space. If local authorities decide to protect home trade
against the influx of retails chains effectively, they can do it by proper wording of
provisions in the Local Spatial Development Plan. All that is needed comes down to the
obligation of maintaining proper proportions between the retail space and the number of
parking spaces and green areas or introducing mandatory protection zones around large-
format stores to deter a potential investor effectively. The other way of protection for home
trade may be entering traffic indicators conditioning a given location in the Local Spatial
Development Plan. Organisation of local vehicle traffic does not fall within an exclusive
competence of local authorities, but it is a very significant decisive element for a potential
investor. Imposing a mandatory left turn or right turn in the organization of vehicle traffic
may contribute to an investor's refrain from a theoretically feasible investment.
Specifying financial effects on a local authority should include total analysis of new
workplaces in respect to a place of residence. On a number of occasions, only few people
employed before in home trade find employment in newly opened large-format stores. It
derives from the fact that the middle-aged people who owned before some commercial
establishments have find it difficult to kick earlier habits in case of taking up a job as a sales
assistant. Furthermore, these persons have definitely higher financial expectations than
young unemployed persons from suburban areas. The retail chains are not willing to
employ persons who are aware of the employees' rights, and the shopkeepers belong to
this group. The practice shows that opening a new commercial facility generates
unemployment in a given city, and it lowers unemployment in the suburban areas.
Decrease in a middle class, with the home shopkeepers who belong to this group, adversely
affects on the image of a city. Similarly, locating a shopping mall in the city centre may lead
to a huge amount of derelict and unkempt vacancies. The increase in the commercial space
generates greater proceeds from property tax for a local authority in the initial period.
Within a few years liquidation of local shops results in the decrease of proceeds from other
properties.
The analysis of home trade in the context of competition with retail chains have
allowed to present weaker sides with the trade in Jaroslaw as an example.

The basic weaknesses of home trade are as follows:

1. Lack of working capital at the suitable level.
2. Lack of basic cooperation between the shopkeepers.
3. Lack of any organization representing the interests of the shopkeepers before the local
authorities.
4. Lack of the continuous processional development in the field of trade and economy.
5. Lack of basic knowledge on the ways of expansion of large-format stores and the
possibilities of saving home trade.
6. Lack of belief in the effectiveness of any preventive and remedial actions.
7. Lack of social solidarity between the shopkeepers and buyers.

4. Conclusions
1. The fundamental document necessary during development of spatial policy related to location
of large-format stores is a Plan of Trade Development (PTD).
2. The analysis of real estate market, prepared by property surveyors, should constitute an
essential element of a Plan of Trade Development.
3. Failure to monitor public space by local authorities and the supply by the shopkeepers is a
reason behind the disproportion between the traditional trade and the large-format one.
4. The optimal retail space for current financial resources of the inhabitants of Jaroslaw should
be equal to about 35 thousand m2.

48
5. In case of carrying out investments of two large-format stores, at least 50% of home trade will
encounter difficulties with reaching minimal profitability level.
6. Creating new workplaces in large-format stores and liquidation of the traditional trade in the
city centre will bring unemployment at the level of a few hundred people in total.
7. Locating a store at Piekarska Street with a total space of 27,000 m 2 will result in the
substantial increase of noise and road traffic.
8. The basic reasons behind a big drop in profitability of the retail trade within the home trade is
doubling the retail space, outflow of potential buyers from smaller suburban areas near
Jaroslaw and the decrease of purchasing power of a potential buyer.
9. The decrease in income among a considerable part of middle class in Jaroslaw will affect
adversely the image of the town. The vacancies will pose a huge aesthetic problem for
Jaroslaw.

49
2.3. ANALYSIS OF THE REAL ESTATE MARKET IN CONSOLIDATED
AREAS

Abstract
The paper presents the impacts of land consolidation and exchange on real estate transactions
concluded on local markets of selected Polish villages. The level and dynamics of changes of
concluded transactions have been evaluated within successive years after land consolidation
works. The subject nature of transactions has been investigated and systematic division of
transactions into free market contracts of sale, and contracts concluded in accordance to tendering
and non-tender procedures has been performed. Trends of real estate transactions, depending on
types of lands and the percentage of arable parcels, parcels planned for housing purposes and
parcels planned for other ways of management in the total number of transactions concerning
arable lands, meadows and pastures were also analysed.

Key words: real estate transactions, local real estate market, land consolidation and exchange

1. Introduction
High demands for land consolidation works exist in Poland, since the average size of a farm equals
to about 8 hectares. Comparing to other European Union countries it is not a satisfactory result (the
Great Britain - about 68 ha, France - about 42 ha, Germany - about 36 ha); moreover, what is even
worse, it is not reflected in the number of performed land consolidation operations. In the seventies
of the 20th century land consolidation works were performed in Poland for the areas of 400,000
hectares every year. Unfortunately, the successive decrease of the number of land consolidation
works was noticed in the eighties and nineties, covering less than twenty thousand hectares per
year. Starting from 1999 this number has been even smaller - only several thousand hectares are
covered by land consolidation works every year. Visualisation of demands for land consolidation,
prepared on the basis of results of surveys performed by the University of Agriculture in Wrocław
("Rural areas and arable lands in Poland - results of surveys –1988”) is presented in Figure 1.

50
Legend
above 50% of the municipality area
between 20% and 50% of the municipality area
towns
other municipalities

Figure 1. Demands for land consolidation by municipalities

Source: Development and possible threats for agroecosystems.
Part IV. Threats for agroecosystems, 2010.

Land consolidation works are regulated in Poland by provisions of the act of March 26,
1982 on, land consolidation and exchange (Off. J. 2003, No. 178, item1749 with later amendments)
and by provisions of the act of June 14, 1960, the code of administrative proceedings (Off. J., 2013,
item 267 with later amendments) in the scope not regulated by the above act.
Following the Polish Standard – Management of lands in agriculture - Terminology PN-
R04151, land consolidation - is a series of designing and technical activities aiming at creation of
more favourable conditions for farming, through improvements of the agrarian structure of farms,
rational management of expansion of extension of lands, adaptation of property borders to
installations of the water melioration system, roads and the terrain relief.
The basic objectives of agricultural land management works include:
- decrease of the number of parcels in particular farms, what results in increase of their size,
- ensuring the access to the public road for each, newly designed parcel,
- creation of the functional road infrastructure,
- decrease of the number of parcels of irregular shapes,
- adaptation of parcel borders to the terrain relief,
- elimination of co-ownership or rural properties, as well as unnecessary usufruct of lands,
- creation of the complex cadastral documentation within the areas covered with land consolidation
works,

51
- settlement of legal status and creation of compatibility between the register of lands and buildings
and the system of property registers.
Therefore the question arises concerning the real estate transactions at this, transformed
local market. What is the number of concluded transactions and which properties are the subjects
of those transactions? Whether the newly created space and land use structure, which is created
following the intentions of participants of the land consolidation process is satisfactory and results
in the small number of real estate transactions? Or, on the contrary, such changes stimulate the
local market development and, as a result, intensified activities of purchasers and sellers, aiming at
conclusion of selling contracts, may be observed? Or, maybe the transfer of property rights results
mainly from operations concerning post-consolidation land management? Answers to these
questions are the subject of the presented paper.

2. A real estate market and its local nature

The real estate market is a complex of relations, which occur between sellers, who submit market
offers concerning purchase of properties and investors which apply with demands for specified real
estates, supported by the readiness to pay (Gawroński and Prus, 2005).
Following the above, the real estate marked consists of:
- subject elements (sellers and purchasers),
- object elements (goods, i.e. properties or their parts of estates and means of payment),
- relations which occur between above elements.
The real estate market may be also defined as:
- operations and interactions between individuals/agents dealing with purchase, selling, exchange
and use and development of real estates,
- business activities, resulting in exchange of goods,
- an abstractive term, covering all real estate transactions in the country,
- an agreement, allowing the seller to meet the purchaser in order to set the price, which will be the
basis for exchange of the given real estate,
- a set of mechanisms, used for transfer of rights and shares in real estates,
- a set of systems, allowing the buyers to meet the purchasers, basing on the mechanism of prices,
i.e. the mutual reactions of individuals, who exchange the property rights into other assets
(Kucharska-Stasiak, 2005).
Due to the spatial criterion, the local, regional, national and international markets are
distinguished. It is the local specification results in the sensitivity of real estates on all changes,
which occur in the given real estate and in it surroundings. Demographic, economic, social and
political changes transfer into the market sensitivity within the given area. Unique features, such as
the stability in a particular place, diversification, durability, stress the local nature of the real estate.
Due to the above, real estate transactions at the local market are, among others, influenced
by:
- population (the volume, the age and gender structure, the family structure of inhabitants),
- employment (the number of employees, level of salaries, stability of incomes),
- inclination to save,
- accessibility of credits,
- accessibility and prices of lands (Kucharska-Stasiak, 2005).
The possible purchaser evaluates the real estate with consideration of local competition.
Therefore, the price he/she is willing to pay for the given property is made dependant on relations
which occur between demands and supply on the given local market.

3. Objectives, the method of research and characteristics of the analysed area

The objective of the work is to analyse the real estate market on consolidated lands, with respect to
real estate transactions. Using the example of local markets of selected Polish villages, the level and
dynamics of changes of transactions concluded in successive years after land consolidation, was
performed. The subject nature of concluded transactions was analysed, together with the
systematic division of transactions onto free-market selling contracts and contracts concluded
according to tender and non-tender procedures. The trends of transactions, depending on land use
types were also checked, as well as the percentage of transactions related to arable parcels, for
which the agricultural production was to be maintained at the same level, as well as parcels
planned for housing or for other types of management in relation to the number of transactions
concerning arable lands and meadows and pastures.

52
 Analysis was performed for five local real estate markets, for which land consolidation
works were completed in the period 2003-2008. The following land register districts were covered
by the analysis:
Siedliska (Miłkowice municipality, Legnica district, Dolnośląskie province),
Krajów (Krotoszyce municipality, Legnica district, Dolnośląskie province),
Lecka (Błażowa municipality, Rzeszów district, Podkarpackie province),
Białka (Błażowa municipality, Rzeszów district, Podkarpackie province),
Błażowa Górna (Błażowa municipality, Rzeszów district, Podkarpackie province).
Data from the register of prices and values of real estates were acquired for the needs of
the discussed analyses; cadastral information available in the WMS Geoportal, e-mapa geosystem,
and data included on studies of conditions and directions of municipal management were also used.
All real estate transactions, which were concluded at the analysed local markets within the
analysed period, i.e. since the completion of land consolidation until December 2012, were
analysed. The descriptive and comparative analysis was applied for the discussed purpose.

4. Results of research works

Table 1 presents the total number of transactions and dynamics of their changes in successive
years, after completion of land consolidation works in five selected Polish villages. It turns out from
Table 1 that the number of real estate transactions concluded in local markets, divided into
particular, one-year periods, is low and varies between several and a dozen or so. On the other
hand, it may be noticed that the number of concluded transactions increases together with the time
which passed since the completion of land consolidation works. It is also interesting to observe,
that the increased intensity in all five local markets was noticed within 4-6 years after land
consolidation works were completed. It means that real estate transactions have not been
influenced by the crisis which occurred in real estate markets in the period 2008-2009 inPoland.

53
 Table 1
The number of transactions and dynamics of their changes in successive years after land consolidation, in land register districts
Siedliska, Krajów, Lecka, Białka, Błażowa Górna

Land register districts

Siedliska Krajów Lecka Białka Błażowa Górna

Transactions
Concluded
Dynamic index

Dynamic index

Dynamic index

Dynamic index

Dynamic index
(2003=100p.)

(2008=100p.)

(2005=100p.)

(2005=100p.)

(2005=100p.)
Number

Number

Number

Number

Number
No Years
1. 2003 3 100.00 - - - - - - - -
2. 2004 8 266.67 - - - - - - - -
3. 2005 8 266.67 - - 2 100.00 2 100.00 3 100,00
4. 2006 14 466.67 - - 8 400.00 0 0.00 2 66,67
5. 2007 7 233.33 - - 7 350.00 4 200.00 5 166,67
6. 2008 7 233.33 1 100.00 6 300.00 3 150.00 12 400,00
7. 2009 6 200.00 1 100.00 15 750.00 7 350.00 11 366,67
8. 2010 11 366.67 1 100.00 10 500.00 10 500.00 7 233,33
9. 2011 8 266.67 7 700.00 4 200.00 6 300.00 8 266,67
10. 2012 8 266.67 4 400.00 7 350.00 3 150.00 7 233,33
Total 80 - 14 - 59 - 35 - 55 -
Source: Author’s own study

54
Table 2 presents the systematic division of the number of transactions in successive years after
implementation of land consolidation works, with respect to the mode of their implementation.
Free market transactions as well as transactions concluded according to tendering and non-tender
procedures, are listed.
Out of the general number of transactions, the majority of transactions were concluded as free-
market transactions in all local markets (register districts: Lecka 69,5%, Błażowa Górna 58,2%,
Siedliska 83,7%, Krajów 92,9%, Białka 80,0%). This may result from the fact that the majority of
the land use structure within analysed markets is the private property of individuals. The highest
sale, 40%, performed in accordance with the tendering procedure, took place in the register district
Błażowa Górna. The seller was the State Treasury or the municipality, and the transaction was
mainly concluded in relation to the planned destination of purchased lands for forestation.
The general rules concerning conclusion of contracts in Poland result from the act of April 23, 1964,
the Civil Code (Off. J., 1964, no. 16, item 93 with later amendments). The detailed regulations
concerning real estate transactions, following the tendering and non-tender procedures, concluded
by public entities in Poland, are regulated by the act of August 21, 1997 on real estate management
(Off. J., 2010, no. 102, item 651 with later amendments) and the decree of the Council of Ministers
of September 14, 2004 on the ways and terms of tenders and negotiations concerning sale of real
estates (Off. J., 2004, no. 207, item 2108).

55
 Table 2
The number of transactions and dynamics of their changes in successive years after land consolidation and their percentage in the total number of transactions,
depending on the mode of transactions, in the land register districts Siedliska, Krajów, Lecka, Białka, Błażowa Górna

Land register district

Siedliska Krajów Lecka Białka Błażowa Górna
Type/mode of real estate transactions [number]
Free market

Free market

Free market

Free market

Free market
Non-tender

Non-tender

Non-tender

Non-tender

Non-tender
procedure

procedure

procedure

procedure

procedure
Tender

Tender

Tender

Tender

Tender
Total

Total

Total

Total

Total
No Years
1. 2003 2 0 1 3 - - - - - - - - - - - - - - - -
2. 2004 4 1 3 8 - - - - - - - - - - - - - - - -
3. 2005 7 0 1 8 - - - - 2 0 0 2 2 0 0 2 3 0 0 3
4. 2006 11 3 0 14 - - - - 8 0 0 8 0 0 0 0 2 0 0 2
5. 2007 7 0 0 7 - - - - 7 0 0 7 3 1 0 4 5 0 0 5
6. 2008 7 0 0 7 1 0 0 1 1 4 1 6 0 3 0 3 10 2 0 12
7. 2009 5 0 1 6 1 0 0 1 6 8 1 15 5 2 0 7 4 7 0 11
8. 2010 10 0 1 11 1 0 0 1 7 3 0 10 10 0 0 10 0 7 0 7
9. 2011 6 2 0 8 7 0 0 7 3 1 0 4 5 1 0 6 4 3 1 8
10. 2012 8 0 0 8 3 0 1 4 7 0 0 7 3 0 0 3 4 3 0 7
Total 67 6 7 80 13 0 1 14 41 16 2 59 28 7 0 35 32 22 1 55
Percentage of 83. 100. 100. 100. 100. 100.
the total [%] 7 7.5 8.8 0 92.9 0.0 7.1 0 69.5 27.1 3.4 0 80.0 20.0 0.0 0 58.2 40.0 1.8 0
Source: Author’s own study

56
Diagrams 1,2,3,4,5 present the percentage of transactions concluded since the completion of land
consolidation works until December 2012, depending on the land use types, in the general number
of concluded transactions on the analysed local markets, i.e. in register districts of Siedliska,
Krajów, Lecka, Białka i Błażowa Górna. Basic on the following lists it may be stated that the majority
of transactions concerned the sale of arable lands, which created the majority of land use types in
the analysed local markets (register districts: Siedliska 31%, Błażowa Górna 49%, Krajów 79%,
Lecka 65%, Białka 79%). However, it should be stressed that these arable lands also included such
areas which were to remain as arable lands in the future, as well as areas, which were planned for
housing purposes, forestation or for which investments related to construction or modernisation of
line infrastructure were planned. It is also worth to notice that built-up lands were often the subject
of transactions (register districts: Siedliska 25%, Lecka 20%, Błażowa Górna 27%). In remaining
local markets the number of transactions concluded for built-up lands did not exceed 10% (register
districts: Krajów 7%, Białka 9%).
The lack od data concerning the land use structure for register districts of Lecka, Białka and
Błażowa Górna results from incomplete descriptions of concluded transactions in register of prices
and the real estate values acquired from the Starost of the District (Powiat) in Rzeszów.

built-up arable lands

permanent meadows
25%
30%
permanent pastures

arable lands
8%
5% 1%
lands used by
31% transportation - railways

urbanized, non built-up

areas

Digram 1. The land use structure of lands, being the subjects of transactions
in the period 2003-2012 in Siedliska village
Source:Author’s own study

57
 built-up arable lands built-up arable lands
7% 7%
7%
2%
20%
arable lands forests

permanent pastures
orchards
10%
arable lands
urbanized, non built-up 65% 3%
79% areas
no data

Diagram 2.The land use structure of lands, being the subjects of Diagram 3.The land use structure of lands, being the subjects of
transactions in the period 2008-2012 in Krajów village transactions in the period 2005-2012 in Lecka village
Source: Author’s own study Source: Author’s own study

built-up arable lands

built-up arable lands
11%
6% 9% 27% forests
3% 3% forests

permanent meadows
permanent pastures

permanent pastures
arable lands 7%
49% 2% arable lands
4%
no data
79% no data

Diagram 4. The land use structure of lands, being the subjects of Diagram 5.The land use structure of lands, being the subjects of
transactions in the period 2005-2012 in Białka village transactions in the period 2005-2012 in Błażowa Górna village
Source: Author’s own study Source: Author’s own study

58
Transactions concerning arable lands, meadows and permanent pastures, concluded in the
analysed local markets within the analysed period, were divided into arable parcels, parcel for
housing purposes and other parcels, depending on the possible ways of management and objective
of the transaction. The above division was illustrated in Diagram 6. As it turns out from this
Diagram, the highest percentage of transactions concluded in every register district, were
transactions concerning land parcels planned for continuation of the agricultural production
(Siedliska 56%, Krajów 91%, Białka 83%, Lecka 80% and Błażowa Górna 57%). Besides, in the
register districts of Siedliska, Białka and Lecka the moderate percentage of transactions concerning
lands planned for housing purposes was observed (above 10%), the higher percentage of such
transactions occurred in Błażowa Górna (23%). Other transactions concerned lands purchased for
the future forestation. Besides, in the Siedliska register district 22% of transactions concerned
lands planned for development or modernisation of railway or road infrastructure, what resulted
from the post-consolidation land management.

Błażowa Górna
Land register district

parcels planned f or line

Lecka inf rastructure

parcels f or housing
Białka

parcels planned f or
f orestation
Krajów
arable parcels

Siedliska

0 10 20 30 40 50 60 70 80 90 100

Diagram 6. Division of transactions concerning arable lands, permanent meadows and pastures,
with respect to land management possibilities or to objectives of sale in land register districts of
Siedliska, Krajów, Lecka, Białka, Błażowa Górna between completion of land consolidation works
and December 2012
Source: Author’s own study

5. Conclusions
1. Basing on performed analyses it may be concluded that performed works concerning land
consolidation and exchange, performed in the analysed local markets, had the moderate
influence on real estate transactions.
2. Real estate transactions concluded in the analysed markets, are influenced by needs of
inhabitants and by plans of investments, resulting from the municipal policy, or from the post-
consolidation management of lands.
3. Analysis of the real estate market, performed for five register districts, for which land
consolidation and exchange works were performed in the past, proved their local nature.
4. The number of transactions concluded in the successive years after completion of land
consolidation works is low - several or less than twenty transactions per year.
5. The subjects of sale were mainly arable lands and built-up land real estates. The free market
sale between individuals was dominating.
6. The small number of transactions does not allow for using statistical methods for analyses; in
the case of reat estate validation it makes the necessity to widen the investigated market with
at least one or several municipalities.
7. There is no possibility to acquire reliable results of average transaction prices in successive
years after completion of land consolidation works, due to types of real estates and highly
differentiated market prices.

59
8. Registers of prices and real estate values, acquired from district starosts (powiats), supplied as
PDF or Word files, make development of analyses or lists highly difficult. Besides, those
registers are not maintained in a uniform way for the entire country, and information stored in
these registers is sometimes incomplete.

60
 2.4. REGRESSION TREE MODEL AS A TOOL FOR CREDIT
DECISIONSI

Abstract
The aim of this paper is to present the model of regression trees, as a tool which can help
during credit decision making. For a significant numbers of banks the need to make the appraisal
report, depend on the size of the outstanding loan. It is associated with the height of the purchase
price of the property. It can be assumed that for a sum less than three hundred thousand zlotys,
these banks or independently verify the purchase price, or outsource this activity of the company.
Taking into account the fact that most real estate is funded with a mortgage, it can be presumed
that gather up a large base of information about such property should not be a problem. The
borrower is obliged to provide a preliminary agreement, which guarantees access to these
information.
Regression tree would in this case, verify the price stated in the contract, using for this
purpose, as much information as possible about real estate. It is also possible to include the
characteristics of hard-to-describe in classical studies-as position at a specific Street, whether
belonging to the elite of the construction complex. The undoubted advantage of this model is the
ability to create several schema or a dozen rules of decision-making, leading to the designation of
the unit price and its standard deviation. The research was conducted for real estate in the
premises in the Cracow city boundaries. Uses the C&RT model (Classification and regression tree)

Keywords: features, variables, mortgage , real estate analysis, regression trees ,attributes of real
estate.

1. Introduction
Nowadays it is hard to imagine buying property without the necessary funding it with a
mortgage. Many banks make the need to carry out the valuation of the received amount and the
nature of the credit market, on which the property is.. Thus allowing themself to carry out
inspections by an employee of the banks and to compare the prices of the real estate to others. This
point it is worth to consider, as far as the use of statistical methods could streamline this process.
The following scheme is proposed to delay real estate price comparison based on several questions
that can be answered yes or no. Such a solution allows you to create a binary scheme, leading to the
separation of property, for which average unit price is calculated and the standard deviation.

2. A classification tree for regression issues (the basics)

In this paper to analyze the data set will be used C&RT algorithm, whose description is shown
below. Using a regression tree analysis can be used to replace the 5 stages (Łapczyński, 2010):
1) selection rules for the distribution of nodes,
2) specify when tree node will become the final node. the criterion of alloy,
3) structure tree,
4) to estimate the quality of the model,
5) term that applies processing rules to the end nodes of the observations of the tree.
Division of node can be made using one of the rules:
• the variance –for the node is the average value of the subsidiary variable computed with an
indication of the variance for appearing in it. The leaf becomes a maximum of
homogeneous, when all the observation shall be equal to the average.
• the average deviation - for the node is estimated median subsidiary variable, as well as the
average absolute deviation cases that depend to a leaf. The final node becomes the most
homogeneous, when all the observation shall be equal to the median income.
Please note that the choice of allocation rules is very important, as they affect the final form of
the model (Jasińska, 2012). In order to ensure a higher accuracy of prediction, it should be chosen
to select a partition based on the variance of. If a model has to be resistant to unusual observations
(outliers remain) and asymmetric distributions of variables should be the average deviation of the
sharing rule. In most cases, the interpretation of results in the form of a tree is rather simple. This
simplicity is valuable not only because the new cases are quickly categorized (it's easier to check
out some conditions than figure a statistics classification for every possible group, or a low number
of organized values based on the values of the predictors of non-linear equation model of complex-

61
based), but also because of the much simpler "model" explaining why the observations are
classified or projected in such a way and not another.

3. The empirical analysis

3.1. Criteria for the assessment of real estate prices indebted according to Polish banks
In the work of several analyses of banks, mortgage. Most of them make a verification of the
price given in the preliminary contract the size of the loan provided (table 1). In this way may be
able to verify the price by an employee of the Bank, which does not necessarily follow the valuation
methods and just that can compare for example if 10 real estate prices are similar, as is the case in
the case of a credit in Mbank.
Table 1
The amount of the loan, for which it is required to draw up an estimate of the sampling frame
The name of The need to draw up valuation survey of The ability to accept the purchase
the bank the amount of sampling frame price by a bank employee
Alior Bank 600 thousand PLN for the Warsaw Yes, for amounts lower than listed
agglomeration in column 2-inspection of bank
for cities > 250 thousand. residents employee
and the loan amount from 350000
PLN
for cities <250 thousand. residents
and the loan amount from 250 000
PLN
Bank Pocztowy Warsaw and around > 250 000 PLN Inspection only in the primary
others >350 000PLN market
Deutsche Bank There is no need On the basis of documentation
supplied by the borrower
Credit Agricole secondary market> 300 000PLN Do Not. Required assessment
Primary market >500 000PLN performed by a third party-it is not
requires a form of sampling frame,
price verification of estimated
presented in preliminary
agreement
Citi Handlowy Regardless of the amount of No such possibility
BZ WBK Regardless of the amount of No such possibility
BOŚ Regardless of the amount, for the For the remaining cases
renovation of the property,
Eurobank Regardless of the amount of credit: all For real estate tenancy on the
properties on the primary market, the secondary market on the basis of
construction of houses the supplied photographic
documentation
Getin Noble For Warsaw > 1 million For amounts lower than in column
Bank for others cities> 500 000 PLN 2
ING The borrower can provide a valuation So, on the basis of photographic
survey documentation
MultiBank for crediting purchase of dwelling When buying Commercial
>1,5 MILION PLN Premises from municipalities,
When buying a House with a value State or cooperative, when
exceeding 750 000 PLN the venue will give security
If you purchase a plot of land and loan
build a House with a value of less than
specified in column 2
Nordea above credit on the amount of In other cases, there is such
800,000 PLN, for properties located possibility
in Warsaw
Pekao Regardless of the amount of No such ability
PKO BP for the loan bigger than 400 000PLN dla zakupu nieruchomości
for mortgages and consolidation lokalowej poniżej 400000PLN
loans above 200 000PLN

62
 every purchase of the commercial
premises, operationally-dwelling,
real estate
Raiffeisen For secondary market For primary market
Mbank If you have not met all the criteria in Yes, if:
column 3 the value of the property
does not exceed 1 million,
It is possible to compare 10
similar properties on a given
local market,
the maximum deviation of
the market price does not
exceed the +/- 15%.
Source: Own study, based on information from banks

3.2. Analysis of real estate market of tenancy in the standard units of the city of Krakow

Divisions on worksheet units allowed simultaneous consideration of variables "Street" and

"subdivision". Allowed to examine which of these attributes play a greater role in price formation.
analysis of an adopting the following parameters:
1) Variables:
Subsidiary "unit price”;
Qualitative variables: "subdivision", "Street", "access", "communication
location/environment", "affiliated facility", "floor", "condition", "functionality”;
Quantitative variable: "usable area”;
2) Stop rule:
Trim according to the variance;
Stop parameter is the minimum size: 1;
Stop parameter is the maximum number of nodes: 1000;
3) Size: determined on the basis of V-x cross-test, where:
The initial value of the random number generator: 1;
v = 10;
reguła błędu standardowego : 1.

63
 Standard unit– Downtown(Śródmieście)
A maximum tree size (96 end nodes) was built, and then it has been trimming process. The
optimal size of Model had 3 shared nodes and 4 knots. Divisions at each of the stages were held on
the basis of the "Street". Such a way of grouping according to the nature of binary trees C&RT.
Despite the fact that the divisions were based on only one variable, the variable leaderboards for
each of the stages, it is possible to determine how important is each of the features.

Figure 1.C&RT tree for standard unit Śródmieście

Source:Own study

In the first stage of Division to the left hit real estate located at:Sarego Józefa, Szlak,
Kochanowskiego Jana, Dajwór, Librowszczyzna, Krakowska, Fenn'a Sereno, Sławkowska,
Przemyska, Studencka, Zamenhofa Ludwika Doktora.As a result of the distribution of the node ID 2
property located at the Street "Zamenhofa Ludwika Dokotra" was separated from the others. Node
distribution in ID3 based on the following streets: MiechowityMacieja, DobregoPasterza,
WłodkowicaPawła, Strzelców, Powstańców, Celarowska, ŁepkowskiegoJózefa, Marchołta.
On the basis of the analysis and conclusions reached, chart pattern that features affecting the
evolution of most divisions at each stage and the prices in the Downtown of this: „street”, "district"
and "location/environment". These are the features determining the position property, perhaps it is
necessary to perform a second analysis for individual districts.Buyers increasingly attach attention
to, what is the street where is the property than what's district .In order to justify this phenomenon
can be tempted to declare that the areas are "artificially" created. District lines have been imposed
upstream along the streets. The buyer does not pay attention to it or it will be lived on the right or
on the left side of the street, and hence does not analyze, which is District place will point to a
specific location, which is represented at figure 2, where the street is the most important and
district takes the second place .

64
 Figure 2.Predictors of severity chart for regression tree standard unit Śródmieście
Source:Own study

On the basis of established trees (Firure 1) can be described using a property conditional
sentences combine them to specific sub-groups:
If the properties are set on the streets: Zamenhofa Ludwika Doktora, the transaction price
is 11 392 PLN/m2±1295 PLN/m2. For the test 11 properties meet this condition.
If the properties are set on the streets: Sarego Józefa, Szlak, Kochanowskiego Jana, Dajwór,
Librowszczyzna, Krakowska, Fenn'a Sereno, Sławkowska, Przemyska, Studencka, their
transaction price is 8947 PLN/m2±569 PLN/m2. There are 19 real estates which deal wih
this conditions
If the properties are set on the streets: Miechowity Macieja, Dobrego Pasterza, Włodkowica
Pawła, Strzelców, Powstańców, Celarowska, Łepkowskiego Józefa, Marchołta their
transaction price is4999 PLN/m2±555 PLN/m2. There are 13 such real estates.
If the properties are set on the streets:29 Listopada Al., Bajeczna, Bobrowskiego Stefana,
Bocheńska, Bogusławskiego Wojciecha, Bohaterów Wietnamu, Brodowicza Józefa, Brogi,
Cystersów, Daszyńskiego Ignacego Al., Gertrudy Świętej, Grzegórzecka, Idzikowskiego
Ludwika, Kielecka, Kolberga Oskara, Kordeckiego Augustyna, Kotlarska, Krowoderska,
Lenartowicza, Marii Curie – Skłodowskiej, Masarska, Mogilska, Moniuszki Stanisława, Na
Groblach, Na Szaniec, Nullo Francesco Pułkownika, Rakowicka, Reduta, Rzeźnicza,
Siemiradzkiego Henryka, Starowiślna, Staszica Stanisława, Straszewskiego, Szafera
Władysława Profesora, Warszawska, Wenecja, Widok, Wieniawskiego Henryka, Wileńska,
Zaleskiego Bohdana, Zyblikiewicza their transaction price is : 7116 PLN/m2±548 PLN/m2.
There are 56 such real estates.

Standard unit – Krowodrza

The analysis was performed on a set of 111. In this case, the group selected trees created a
"competent" sizes using the rule of one standard error. Model to satisfy this condition have 6
terminal nodes, at an average price of 6655 PLN/m2 ± 1261 PLN/m2 for the node. Similarly as in
the case of analysis for standard units downtown, the most important attributes of the ruling and

65
the price turned out to be a "Street", "City", "location/environment". The analysis was performed on
a set of 111. In this case, the group selected trees created a "competent" sizes using the rule of one
standard error. Model to satisfy this condition have 6 terminal nodes, at an average price of 6655
PLN/m2 ± 1261 PLN/m2 for the node. Similarly as in the case of analysis for standard units
downtown, the most important attributes of the ruling and the price turned out to be a "Street",
"City", "location/environment".For the real estate market, in which were made, in addition to the
"Street" was also a "condition" (despite the fact that he had only a quarter turn as far as the validity
of). At the stage of the first Division to the left node hit offices lieing on the streets: Felińskiego
Zygmunta Szczęsnego Arcybiskupa, Lubelska, Spokojna, Reymonta, Weryhy - Derowskiego,
Piastowska, Prusa Bolesława, Kasztanowa Al., Królowej Jadwigi, Morelowa, Dunin - Wąsowicza
Zbigniewa Rotmistrza, Tatarska, Emaus, Księcia Józefa, Focha Ferdinanda Marszałka Al., Wyrwy -
Furgalskiego Tadeusza, Salwatorska, Kasztelańska, Kogucia, Jesionowa.The vast majority of these
are the streets belong to the District of Zwierzyniec. Offices were grouped just based on location, so
you must carry out the analysis on a smaller territorial unit.

Figure 3.C&RT tree for standard unit Krowodrza

Source:Own study

66
 The right branch of the tree is more extensive. The second grouping attribute appears(Figure
4) here on the basis of which they were separated from each other with different real estate
condition. The application of the segmentation is as follows, the real estate market can be divided
into the streets more attractive and less attractive. In the less prestigious streets there are offices
with very good condition, good and sufficient and evil.

Figure 4.The validity of the regression tree attributes chart for standard unit Krowodrza
Source:Own study

Conditional sentences describing the terminal nodes are as follows:

If the properties are set on the streets:FelińskiegoZygmuntaSzczęsnegoArcybiskupa,
Lubelska, Spokojna, Reymonta, Weryhy - Derowskiego, Piastowska, PrusaBolesława,
Kasztanowa Al., KrólowejJadwigi, Morelowa, Dunin - WąsowiczaZbigniewaRotmistrza,
Tatarska, Emaus, KsięciaJózefa, FochaFerdinandaMarszałka Al., Wyrwy -
FurgalskiegoTadeusza, Salwatorska, Kasztelańska, Kogucia, Jesionowa their average unit
price is 8351 PLN/m2±524 PLN/m2. For the test set can distinguish 27 real estate that
meet the condition.
If the properties are set on the streets: Łokietka Władysława and their condition is very
good is so the average price on level 4655 PLN/m2±210 PLN/m2. For the collection to be
analyzed can distinguish 3 real estate that meet the condition.
If the properties are set on the streets: ArmiiKrajowej, Białoprądnicka,
ChełmońskiegoJózefa, JaremyMarii, Konecznego, Łobzowska, ŁupaszkiMajora,
Mazowiecka, MyczkowskiegoStefanaProfesora, Na Błonie, Narutowicza Gabriela, Palacha
Jana, RadzikowskiegoWalerego, Eliasza, RydlaLucjana, Stachiewicza, Stelmachów,
Wrocławska, Zdrowaand their condition is very good is the average price is 7160
PLN/m2±456 PLN/m2. For the collection to be analyzed can be singled out 22 real estate
that meet the condition.
If the properties are set on the streets: Białoprądnicka, Kazimierza Wielkiego, Królewska,
Łokietka Władysława, Chocimska and their condition is good, sufficient or bad its unit

67
 price is 6971 PLN/m2±320 PLN/m2. For the collection to be analyzed can distinguish 8
real estate that meet the condition.
If the properties are set on the streets: Armii Krajowej, Chełmońskiego Józefa, Kuźnicy
Kołłątajowskiej, Lea Juliusza, Łupaszki Majora, Makowskiego Tadeusza, Myczkowskiego
Stefana Profesora, Na Błonie, Potockiego Kostki, Radzikowskiego Walerego Eliasza,
Siemaszki, Sienkiewicza Henryka, Stachiewicza, Stanisława Kostki Potockiego,
Wrocławska, Żabiniec, Batalionu Skała Ak, Kijowska Al., Kmietowicza, Łobzowska,
Wierzyńskiego Kazimierza, Mazowiecka, Narutowicza Gabriela, Pod Strzechą, Prądnicka,
Rybałtowska, Urzędnicza. If the condition is good then the average price is 5906
PLN/m2±284 PLN/m2. For there are set to be analyzed 26 real estate that meet the
condition.
If the properties are set on the streets: Armii Krajowej , Chełmońskiego Józefa, Kuźnicy
Kołłątajowskiej, Lea Juliusza, Łupaszki Majora, Makowskiego Tadeusza, Myczkowskiego
Stefana Profesora, Na Błonie, Potockiego Kostki, Radzikowskiego Walerego Eliasza,
Siemaszki, Sienkiewicza Henryka, Stachiewicza, Stanisława Kostki Potockiego,
Wrocławska, Żabiniec, Batalionu Skała Ak, Kijowska Al., Kmietowicza, Łobzowska,
Wierzyńskiego Kazimierza, Mazowiecka, Narutowicza Gabriela, Pod Strzechą, Prądnicka,
Rybałtowska, Urzędnicza. If the condition is sufficient or bad is the average price is 5299
PLN/m2±137 PLN/m2. For there are set to be analyzed 25 real estate that meet the
condition.

Standard unit – Podgórze

Study of the relationship between the unit price and the various attributes of the started the
creation of a group of 138 of which is model No 135, where the cost of 10-x cross-test amounted to
298982 PLN/m2, and the number of leaves 4.Partitions made on the standard unit, confirm the
need for repeated analysis for smaller areas. In this case, the variables which most influenced the
development of mechanisms for the real estate market (Table 2) , turned out to be "street", and
then "subdivision". “Technical state” has appeared in third place, with a validity of more than half
less than the most important attribute. This can attest to the fact that the surveyed area most of the
premises is similar to each other in terms of condition.
The binary nature of the tree meant that on two successive stages, the Division has been based
on the "Street". As a result of the first division in the left node has properties which the average
price is about 1553 PLN/m2 more than the average price in the node(Figure 5) .On this basis, it can
be assumed that streets : Barska, Józefińska, Kapelanka, Komandosów, Krakusa, Ks. Pawlickiego,
Mieszczańska, Nowogródzka, Praska, Różana, Rynek Dębnicki, Saska, Słomiana, Słońskiego, Św.
Jacka, are considered to be more "attractive", appearing in the collection.

Table 2
Summary of the validity of the regression tree attributes for standard units of Podgórze
Atrybut Importance
Street 1.00
District 0.87
Technical state 0.46
Lokalizacja/otoczenie 0.43
Floor 0.12
Transport access 0.09
Surface 0.08
Functionality 0.07
Law ground 0.03
Rooms appurtenant 0.03
Source:Own study

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 Figure 5.C&RT tree for standard units Podgórze
Source:Own study

Properties assigned to describe leaves the following (Figure 5):

If the real estate is located at: Barska, Józefińska, Kapelanka, Komandosów, Krakusa, Ks.
Pawlickiego, Mieszczańska, Nowogródzka, Praska, Różana, Rynek Dębnicki, Saska,
Słomiana, Słońskiego, Św. Jacka their average unit price is 7386 PLN/m2±331 PLN/m2.
For the test set can distinguish 35 properties that meet the condition.
If the real estate is located at: Borowinowa, Czarnieckiego Stefana, Czarnogórska, Duża
Góra, Gromady Grudziąż, Jerzmanowskiego Erazma, Kępna, Kurasia, Lilli Wenedy, Lipska,
Łużycka , Mała Góra, Modrzejewskiej Heleny, Nad Potokiem, Niewodniczańskiego
Henryka, Nowohucka, Petrażyckiego Leona, Podłęska, Stoszki Ignacego, Ściegiennego
Piotra Księdza, Śliska, Teligi Leonida, Wielicka, Włoska, Zakopiańska, Zbrojarzy, Żywiecka.
If their condition is very good is the average price per unit is 6281 PLN/m2±477 PLN/m2.
For the test set can distinguish 8 real estate that meet the condition.
If the real estate is located at: Borowinowa, Czarnieckiego Stefana, Czarnogórska, Duża
Góra, Gromady Grudziąż, Jerzmanowskiego Erazma, Kępna, Kurasia, Lilli Wenedy, Lipska,
Łużycka , Mała Góra, Modrzejewskiej Heleny, Nad Potokiem, Niewodniczańskiego
Henryka, Nowohucka, Petrażyckiego Leona, Podłęska, Stoszki Ignacego, Ściegiennego
Piotra Księdza, Śliska, Teligi Leonida, Wielicka, Włoska, Zakopiańska, Zbrojarzy, Żywiecka.
If their condition is good or bad albodostateczny is the average price per unit is 5501
PLN/m2±309 PLN/m2. For the test set can distinguish 59 properties that meet the
condition.
If the real estate is located at: Barbary, Białoruska, Bobrzyńskiego Michała Profesora,
Bojki, Borkowska, Brodzińskiego Kazimierza, Celna, Dauna, Fredry, Kołodziejska, Kurasia,
Makowa, Parkowa, Płaszowska, Przemysłowa, Przewóz, Siemienowicza Kazimierza,
Sułkowskiego, Tarnowskiego Jana, Turka Wincentego Księdza, Turniejowa, Walerego
Sławka, Warneńczyka Władysława, Zamiejska is the average price per unit is 6244
PLN/m2±308 PLN/m2. For the test you can set highlight 39 properties that meet the
condition.

Standard unit – NowaHuta

For standard unit, NowaHuta was carried out on the basis of the tree in which the division was
subject to 5 knots, and the number of leaves stood at 6. In the first stage, a factor for turned out to
be a condition, but it was only in second place in the ranking of validity (Figure 6).

69
 Figure 6.The validity of the regression tree attributes chart for standard units of Nowa Huta
Source:Own study

Figure 7.C&RT tree for standard units Nowa Huta

Source:Own study

As for the three standard units, which analyzed previously, the most important attribute of the
price makers turned out to be a "Street". Based on this variable were split three nodes . Left and
right branch of the tree (Figure 7) are the same size. Subsequent divisions to which the node hit
real estate, where the condition was very good or good, based on the "street".
For premises belonging to branches of the right can be drawn that the villages real estate on
condition sufficient or bad, can be divided into those that lie on the streets more "trendy" and less.
In the case of streets which enjoy popularity, it is not so significant difference in condition. In turn,
for the streets "worse" this attribute is starting to play a role.

70
The following conditional sentences describe the final nodes in the tree (Figure 7):
If the property is located on one of the streets or settlements: Czyżyńska, Strusia Józefa,
Centrum A, Stalowe, Młodości and her condition is very good, or good is the average price
is 6690 PLN/m2 ± 380 PLN/m2. For the test set can distinguish 6 properties that meet the
condition.
If the property is located on one of the streets or settlements: Sołtysowska, 2 Pułku
Lotniczego, Na Wzgórzach, Na Stokuand her condition is very good, or good is the average
price is 5233 PLN/m2 ± 172 PLN/m2. For the test you can set highlight 19 properties that
meet the condition.
If the property is located on one of the streets or settlements: Albertyńskie,
BohaterówWrześnia, Centrum C, Dywizjonu, Jagiellońskie, Kamionka, Kazimierzowskie,
Kolorowe, KurzeiJózefaKsiędza, Ogrodowe, Okulickiego, Oświecenia, Piastów, Słoneczne,
StrusiaJózefa, Szkolne, Teatralneand her condition is very good, or good is the average
price is 5928 PLN/m2 ± 300 PLN/m2. For the test you can set highlight 24 real estate that
meet the condition.
If the property is located on one of the streets or settlements: Piastów, Tysiąclecia,
Bohaterów Września, Kuczkowskiego Mikołaja Księdza, Jagiellońskie, Albertyńskie,
Kościuszkowskie, Kolorowe, Na Skarpie, Sportowe, Szkolne, Centrum Eand her condition
is sufficient or bad is the average price is 5401 PLN/m 2 ± 239 PLN/m2. For the test you
can set highlight 26 properties that meet the condition.
If the property is located on one of the streets or settlements: Centrum A, Centrum B,
Centrum C, Centrum D, Dywizjonu, Górali, Hutnicze, Kalinowe, Krakowiaków,Na Stoku,
Na Wzgórzach, Ogrodowe, Słoneczne, Stalowe, Szklane Domy, Teatralne, Urocze, Wandy,
Zgody, Zielone, 2 Pułku Lotniczego, Handlowe, Kazimierzowskie, Na Lotnisku,
Niepodległości and her condition is bad then the average price is 4281PLN/m2 ± 215
PLN/m2. For the test you can set highlight 12 properties that meet the condition.
If the property is located on one of the streets or settlements: Centrum A, Centrum B,
Centrum C, Centrum D, Dywizjonu, Górali, Hutnicze, Kalinowe, Krakowiaków,Na Stoku,
Na Wzgórzach, Ogrodowe, Słoneczne, Stalowe, Szklane Domy, Teatralne, Urocze, Wandy,
Zgody, Zielone, 2 Pułku Lotniczego, Handlowe, Kazimierzowskie, Na Lotnisku,
Niepodległości and her condition is sufficient then the average price is 4952PLN/m 2 ±
307 PLN/m2. For the test set can distinguish 37 properties that meet the condition.

4. Conclusions
Presented approach could successfully be used by banks to real estate prices, which is expected
to be secured by mortgage debt. It allows you to specify the unit price along with the standard
deviation, which is the criterion in Mbank. The analysis was based on valuable available in
preliminary agreement, possibly enriched with photographic documentation, or personal
inspection, thus such a solution requires no additional costs. Because the analysis was conducted
for units of the city of Krakow, the standard, you can assume that the smaller cities it is possible to
create one model, with no extra line breaks. Banks on a regular basis could update their database
and from time to time review the how to create a tree. This method would ensure transparency of
rules verification of property prices for all outlets, while the time to wait for the promise could be
shorter.

iThis work is financed from funds for science realized at AGH University of Science and Technology, allocated
for the year 2013

71
72
3. GIS AS INSTRUMENT OF PROPERTY MARKET
RESEARCH

73
74
 3.1. APPLICATION OF GIS SPATIAL ANALYSIS FOR MAPPING OF
AVERAGE PRICES OF DWELLINGS

Abstract
The average prices of residential are important information for people, who want to buy or to sell
an apartment. The spatial distribution of these prices in the area is shown on the map of average
prices of dwellings. GIS spatial analysis are applied for mapping.
The paper presents vector and raster analysis of spatial data and cartographic presentation
methods. The second part of the paper describes the stages of mapping of average house prices
using spatial analysis and drawn up raster and isoline maps. Theses maps were compiled for part of
Olsztyn using ArcGis 10.1.

Keywords: GIS, spatial analysis, cartographic presentation methods, map of average prices of
dwellings

1. Introduction
The average prices of real estates are important information for participants of the real estate
market among others for people buying or selling apartments. The spatial distribution of the unit
price of an apartment in the area is shown on the map of average prices of dwellings. GIS spatial
analysis are applied for mapping.
This paper was developed on the basis the thesis (Żurek 2013) about the issues.
The lexicon of geomatics of the Polish Association for Spatial Information defines the
spatial analysis in the following way: „it is analysis, which aims at extracting or acquiring the new
spatial information, in particular, geographic information. […] It enables modelling of complex
geographic phenomena, relations and processes, serving for their monitoring and forecasting”.
Due to the applied methods spatial analyses may be divided into:
 horizontal analyses concerning relations between objects and phenomena, within one
information layer, such as: neighbourhood of parcels, the course of borderlines,
determination of the most effective route from point A to point B, with consideration of
assumed criteria,
 vertical analyses, which analyse relations between objects and phenomena concerning
various elementary surfaces, which occur on particular information layers (Brach 2012).

2. Vector and raster analysis of spatial data

Methodology of spatial analyses depends on the applied data model. Two basic spatial data models,
the vector and the raster model, were determined. The vector data model is usually applied for
representation of discrete data, and the raster model - for representation of continuous data.
Appropriate sets of tools are applied for the needs of spatial analyse of vector and raster
data. Data stored in both models may be used at the same time, due to the possibility of data
conversion.
The basic functions of the vector analysis include:
 Visualisation (classification and symbolisation). This concerns the preliminary analysis of
spatial data. Visualisation aims at an appropriate selection of the sequence of displayed
layers, in order to extract the maximum information, such as determination of values
which considerably differs from other values, looking for regularities in data distribution,
identification of relations between data, as well as data verification. Layers are usually
arranged in the following sequence: the polygon layer at the bottom, then the line layer and
finally the point layer.
The point layer. Values in the attribute field may have the features of quantitative
or qualitative data. Quantitative data may be presented by means of symbols,
which size depends on the attribute value, and the qualitative data are presented
by means of symbols or a colour palette.
The line layer. Depending on the number of line layers data may be presented by
means of one or several types of lines, such as dashed line, continuous line, lines of
diversified thickness or colours; this concerns both, the qualitative and
quantitative attributes. Marking the line direction by means of an arrow symbol is
the special way of visualisation of a line.

75
 Polygon layer. This layer may be presented in many ways. The image of a polygon
consists of its outline and filling. The qualitative data may be presented by means
of a colour palette. i.e. the gradual changes of the colour intensity, from the
minimum to the maximum level. The quantitative data may be presented by means
of classification. Data is divided into appropriate subsets, the, so-called, classes.
Between classes several limit values are specified. The following methods of
division a set into classes may be mentioned:
 natural breaks Jenks;
 quantile;
 equal interval;
 defined interval;
 standard deviation.
 Attribute selection. By means of this analysis, such objects may be selected and marked,
which attribute values meet the specified logical conditions (defined by means of the SQL
language). The result may be marked in the table - a subset of data with the displayed
image of the selected object or the new layer with results (e.g. SHP).
When using ArcGIS software, the analysis of vector data may be performed by means of
attribute selection Select By Attributes and by means of Select By Location using the
following methods:
Create a new selection;
Add to current selection;
Remove from current selection;
Select from current selection.
 Selection based on spatial relations. For all spatial objects (point, line, polygon) defined
spatial relations with objects from other layers exist. By means of the discussed selection it
is possible to find objects, which meet required attribute conditions. The applied spatial
queries include:
Intersect, Overlap;
Are within a distance of;
Are within;
Are completely within;
Contain;
Contain Clementini;
Completely contain;
Have their centroid in;
Share a line segment with;
Touch the boundary of;
Are identical to;
Are crossed by the outline of.
 Buffering. It consists of determination of a zone basing on the specified distance (the limit
value) to selected objects (points, lines, polygons). Polygon objects may be buffered both,
from inside, as well from outside, points and lines - only from outside. Buffers may be
mutually overlapped - when connected, they create buffer zones.
 Overlaying. This function consists of creation of a layer which includes thearea of interest
only, i.e. of overlaying layers, one on another, connection of geometry and attributes of
layers. Such overlaying may be performed by means of three commands:
Clip. As a result of this function a new layer is created, which includes objects
located inside the cutting polygon;
Intersect. This function finds the common areas of a specified type (points, lines,.
polygons); the common geometry and attributes of both classes of objects is the
result;
Union (Overlay). This function concerns only the polygon layers and it consists of
maintenance of all elements of layers, which are overlaid.
 Generalisation.It aims at the decrease of the number of points and sections in the given
layer, assuming the small information losses. The D-P (Douglas-Peucker) algorithm is the
most popular algorithm for generalisation of line objects, i.e. the reduction of points of apex
(Głażewski 2007).

76
The basic functions of raster analysis include:
 Visualisation. One-channel raster maps may be presented by means of three methods.
Firstly, various colours may be assigned to various values, which occurs on the map. The
second possibility is to perform classification of raster quantitative data, similarly to the
case of vector data. The third method consists of increasing the contrast of the photograph.
Multi-channel raster maps are presented by means of three channels. If rasters have the
Value Attribute Table assigned, it is possible to perform the preliminary data analysis.
 Local functions, being the mostly used group of raster analysis methods. The following
methods may be distinguished:
Reclassify means to assign values from defined intervals on the "old map" to the
new values on the "new map". A typical utilisation of this function is creation of the
qualitative maps, as well as connection of cells into subsets, the, so-called, zones,
for which successive analyses may be performed;
Combine. This function identifies areas which meet the specified combination of
values, basing on two or more raster maps;
Cell Statistics. This function aims at calculation of selected statistical information
(the average value, median, standard deviation, the extension, maximum and
minimum, sum, the most often and the most seldom values, diversification) from
cells of the raster maps;
Map algebra. Allows to perform multi-criteria spatial analyses, using raster data
and specifying relations between the data. The syntax of this script language is
simple; it utilises elementary logical operations, such as the common part, the
logical sum, for calculations on a map. This tool allows for performing four main
operations:
 local operation - comparison of attributes of a given pixel with
corresponding (with respect to location) features from other information
layers;
 focal operation - analysis of the neighbourhood of a given cell;
 global operation - determination of values which describe the entire
thematic layers (e.g. median, extension);
 zonal operation - analysis of blocks of pixels of the same attributes (Gotlib
et al., 2007);
 The neighbourhood function. Values of cells on the resulting map depend on the adjacent
cells only. Statistics calculations may be performed by means of a function, which utilises
the, so-called, movable window, Focal Statistics and Block Statistics, and connection of cells
of the raster map (grouping) is performed by means of the Region Group function.
 Zonal functions. They are the functions which calculate statistic data for each data set of
the zone, basing on values of an arbitrary raster (Zonal Statistics) and characterising the
geometry of zones as objects (Zonal Geometry).
 Global functions. They are the functions which assign values to a pixel, basing on analysis
performed for the entire raster. Two functions are distinguished: Euclidean Distance -
which determines the map of distances to defined objects and Euclidean Allocation - which
fills "empty" cells „No Data” with „no empty” values from adjacent cells.
 Interpolation. It means the exchange of point data into raster, continuous fields of
quantitative or qualitative variables. The following methods of interpolation of quantitative
data are distinguished:
Inverse Distance Weighted IDW - the value assigned in space is the result of
interpolation of values from measuring points, from the neighbourhood defined
earlier (Cascadoss 2009).
Spline - the values of cells are estimated by means of a mathematical function; this
leads to a smooth surface, which crosses exactly two initial points (e-GIS
educational centre).
Natural Neighbour - a value, which occurs in the nearest measuring point is
assigned to each point of the space (Cascadoss 2009).

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3. Cartographic presentation methods
GIS software offers wide abilities to visualise data using various cartographic methods.
Creation of a correct and useful thematic map requires the specialised knowledge from the user.
Appropriate selection of the scale and the nature of phenomena related to presented objects, as
well the knowledge of data presentation are necessary (ZETO IT Centre).
According to the K-3 Technical Instruction, eight methods of data presentation are
distinguished, with consideration of qualitative and quantitative method groups.
 Qualitative methods
Signature method. In the case of this method, location of objects and phenomena
are presented by means of signatures (symbols). Signatures are divided into
geometric, symbolic, image, alphabetic and numerical symbols;
Method of ranges. This method is used for presentation of the presence of the
given phenomena on the map (e.g. occurrence of particular species of animals and
plants). It is possible to overlay ranges one on another; they may be open or
closed;
Chorochromatic method. It is the extension of the method of ranges. It consists of
dividing the area into field of diversified quality. This method is, for example,
applied on geological maps, as well as on soil and administration maps (Gisplay).
 Quantitative methods
Cartodiagram method. The objective of this method is to present the intensity of a
given phenomena within distinguished surface units (usually in the form of flat
figures or solids located directly on a map), using diagrams. Point, linear (vector,
band) and surface (natural, geometric, eumorphic) cartodiagrams are
distinguished;
Dot (point) method. The objective of this method is to present distribution of
phenomena on a map using dots, which symbolise the number of objects, but not
particular objects. The topographic dot method (single-weight and multi-weight
method) and cartographic dot method (single-weight and multi-weight method)
are distinguished (Gisplay);
Cartogram method. The objective of this method is to present the intensity of a
given phenomenon (e.g. the population density) within a given area (as province)
using the diagram (or hachure);
Isoline method. Phenomena are presented by means of a line, which connects
points of the same value of a certain feature. The following isolines are
distinguished:
 isolines which describes the terrain relief (determined basing on direct
surveys in the field or as a result of interpretation of aerial photographs):
o isohypses (contour lines) - lines connecting points of the same
elevation,
o bathymetric contour lines - lines which connect points of the
same depths;
 isolines which characterise climatic and hydrological features
(determined basing on interpolation from the existing measuring points):
o constant pressure lines - lines which connect points of the same
pressure;
o isoamplitudes - lines which connect points of identical
amplitudes;
o isotherms - lines which connect points of the same temperature;
o isohels - lines which connect point of the same illumination by the
Sun;
o isohyets - lines which connect points of the same quantity of
rainfalls;
o lines which connect points of the same speed of the wind;
o isohalines - lines which combine points of the same level of water
salinity;
o lines which connect points of the same beginning of flower
blooming;
 isolines which characterise distances:

78
 o equidistant lines - lines connecting the same distances from the
limits of the central area;
o isochrones - lines connecting the same time required to travel
from the given point.
Dasymetric method. This method presents areas which are characterised by
phenomena of the same density (step nature).

4. A map of average transaction prices of dwellings

A map of average prices of dwellings is the cartographic product, which presents the spatial
distribution of average, unit prices of dwellings, located within a given area. It is the aid for the
players in the real estate market, at the stage of its preliminary analysis, including the owners of
dwellings, who intend to sell the property, as well as for individuals, who intend to purchase it. The
advantage of this map concerns its relative simplicity and the speed of development, which result,
among others, from utilisation of GIS spatial analysis. Such map may be accessible in the form of
ready-to-use cartographic products, as well as it may be generated on-line, by a map portal. It may
be produced as a raster or as a isoline map.
It should be also noticed that that this map may be useful in the process of the real estate
market analysis, performed by a real estate expert for the needs of valuation, in particular, for the
needs of evaluation of attractiveness of locations of given real estates. At the same time, it is worth
to remember, that the presented price is the approximation of the market value of the real estate
and it cannot be directly used in the real estate market analysis.

5. Development of a map of average prices of dwellings for a part of Olsztyn

Creation of a map of average prices of dwellings for the south-eastern part of the city of Olsztyn,
was commenced from acquisition of source data from the cadastre and the register of prices and
values of real estates, which is maintained for the city of Olsztyn. This data, recorded in SWDE
format, was converted to 2 files of the relational database in *mdb format, using SWDE Manager.
The resulting files were connected in one file of the relational database (Olsztyn.mdb).
The basic part of works aiming at creation of the map of average prices of dwellings for the
part of Olsztyn was performed with the use of ArcGIS 10.1 software package, including Model
Builder, which allows for automation of the following operations.
Bolded names of files are own names, created for the demands of the discussed project.
At the beginning the project called Projekt_SIP.mxd was created (in the"2000" co-ordinate
system, zone 7), the following layers were imported form the file geodatabase (olsztyn.mdb) to this
project:
- SHP files of parcels and buildings from the land and buildings registration (Buildings,
parcels)
- tables of parcels, buildings, premises, transactions and dictionaries of rights to parcels,
buildings and premises, from the register of prices and values of real estates:
OPLATA_RT_BUDYNEK (fees building); OPLATA_RT_DZIALKA (fees parcel); OPLATA_RT_LOKAL
(fees premises); OPLATA_RT_SLO_PRAW_BUD (fees right, building);
OPLATA_RT_SLO_PRAW_DLK(fees right, parcel); OPLATA_RT_SLO_PRAW_LOK (fees right,
premises); OPLATA_RT_SLO_STRONY (fees, parties); OPLATA_RT_TRANSAKCJE (fees,
transactions).
The next step was creation of centroids of buildings (points located inside objects, which
represent the geometric "centres" of areas) with the use of the tool from ArcToolbox: Data
Management Tools → Feature → Feature To Point, in order to create the layer of centroids from the
layer of Budynki_Centr by means of Model Builder.
The important element of the described process was calculation of the price of 1 sq.m. of
dwellings, for every transaction, connected with the centroid of the building. The result of this
operations was the table (Translokale_3a) with centroids of dwelling transactions, related with
buildings.
The following operations should be performed in order to create this table:
 create relations between the following tables in MS Access:
OPLATA_RT_BUDYNEK (fee, building);
OPLATA_RT_LOKAL (fee, premises);
OPLATA_RT_TRANSAKCJE (fee, transactions);
OPLATA_RT_BUDYNEK (fee, building.
 add the field Cena_1m2 (price_1 sq.m.) to the table Budynki_Centr;

79
  assign transactions to centroids; as a results the table Translokale was created;
 copy data from the table Translokale, which was not physically created (it was created in
virtual memory only), to a new table Translokale_2;
 calculate prices of 1 sq.m. of dwellings; as a result a new table Translokale_3 was created.

Then, transactions from the table Translokale_3 were selected according to the following
criteria:
real estate type: premises,
functions of premises: dwelling,
price of 1 sq.m., transaction in the price interval 500 zl - 10 000 zl,
location within the following cadastral blocks: 99, 101, 102, 105, 106, 107, 110,
111, 112, 114, 118, 119, 125, 126, 127, 133, 160,
what resulted in the output table Translokale_4a.
In order to create the map of average transaction prices of dwellings for 2012, selection of
transactions included in the table Translokale_4a was performed, according to the transaction
date: the year 2012, obtaining the table Translokale_4a_D5.
Then, transactions were selected from this table according to the interval of prices of 1 sq.m.,
which was determined earlier. The price interval for transactions of the given year is settled
as the interval of values <u- 2σ, u+ 2σ>, where u- is the arithmetic mean for the set, σ - the standard
deviation value. About 95% of transactions were selected this way.
Selected transactions were recorded in the table Translokale_4a_2012.
The next stage of creation of the map of average prices of dwellings was interpolation of
selected centroids to the raster and cutting the raster to the limits of the analysed area.
Interpolation of centroids included in the table Translokale_4a_2012 to the raster
Translokale_5a_2012, considering the price of 1 sq.m. of dwellings, was performed with the use of
the tool from ArcToolbox application: Spatial Analyst Tools → Interpolation → IDW. The above
raster was then cut to the limits of the are of elaboration, with the use of the tool Analysis Tools →
Extract → Clip and called Translokale_5a_2012Clip.
In order to create the raster map, classification of values of the above raster was performed.
For this purpose two following methods were applied:
Manual. In the raster values were divided into 8 classes, with the interval of 400 zl, into the
following groups:
o below 3 200 zl;
o 3 200 zl - 3 600 zl;
o 3 600 zl - 4 000 zl;
o 4 000 zl - 4 400 zl;
o 4 400 zl - 4 800 zl;
o 4 800 zl - 5 200 zl;
o 5 200 zl - 5 600 zl;
o above 5 600 zl.
The resulting raster (M1_2012) is a map at the scale of 1:20000 on the background data of
the Buildings layer; it is illustrated in Figure 1.
Standard Deviation, where limits of classes are distances from the arithmetic average of the
set in the form of multiples of standard deviations. As a result of classification the following
groups of values for each raster were created (rounded to zlotys):
o 2 889 zl - 2 964 zl;
o 2 964 zl - 3 517 zl;
o 3 517 zl - 4 070 zl;
o 4 070 zl - 4 623 zl;
o 4 623 zl - 5 176 zl;
o 5 176 zl - 5 729 zl;
o 5 729 zl - 5 944 zl.
The resulting raster (M2_2012) is a map at the scale of 1:10000, on the background data of
the Buildings layer; it is illustrated in Figure 2.
Then, the isoline map of average prices of dwellings was created. For this purpose a tool
was selected from the ArcToolbox application, Spatial Analyst Tools → Surface → Contour was used.
Input raster is Translokale_5a_2012Clip and output polyline features is C_2012. Contour interval
has been set as 250, and the base contour as 500. The isoline map was created at the scale of
1:20000; it is illustrated in Figure 3.

80
Figure 1. A map of average prices of dwellings for the south-eastern part of the city of Olsztyn,
according to prices for 2012, at the scale of 1:20000
Source: Żurek, 2013

81
Figure 2. A map of average prices of dwellings for the south-eastern part of the city of Olsztyn,
according to prices for 2012, at the scale of 1:10000
Source: Żurek, 2013

82
 Figure 3. A isoline map of average prices of dwellings for the south-eastern part of the city of
Olsztyn, according to prices for 2012, at the scale of 1:20000
Source: Żurek, 2013

6. Conclusions
The possibilities to apply GIS spatial analysis for the needs of creation of a map of average prices of
dwellings, are presented in the paper. Utilisation of ArcGIS 10.1 software package, including Model
Builder, allowed for automation of the map creation process. Two raster maps and one isoline map
were created. Tools included in ArcToolbox application were, among others, used to create those
maps:
Data Management Tools → Feature → Feature To Point,
Spatial Analyst Tools → Interpolation → IDW.
Analysis Tools → Extract → Clip Spatial Analyst Tools
Spatial Analyst Tools → Surface → Contour.
In the case of a raster map classification of the raster values was performed using two methods:
Manual and Standard Deviation. It seems that the map created with the use of the Manual method is
easier readable due to the fact that more people got used to using the "rounded numbers". On the
other hand, when one compares the isoline map with raster maps, presentation of average prices is
more readable using the raster than in the case when lines of the same, unit prices of dwellings, are
used.
It should be noticed that the simplicity and speed of creation of the above maps, being their
considerable advantage, results, among others, from the use of GIS spatial analysis tools, as well as
that they may be published by the ArcGIS online services, what will ensure access to those maps for
many interested individuals.

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 3.2. THE MAP OF LAND PRICES AND THE LAND VALUE MAP IN
POLAND AND CHOSEN EUROPEAN COUNTRIES

Abstract
The value of land and the average price of land is very important information in the process of
land management. They are used by public bodies, companies as well as private individuals.
The spatial distribution of unit average prices and unit values in relation to land situated in the
area is presented appropriately on the map of average land prices and the land value map. These
types of maps, in particular land value maps, are compiled in many European countries, but they
differ.
The paper presents the concepts of map of average land transaction prices and land value map,
which are included in the Polish legal acts. The rules for compilation of these maps are given too.
Then in the paper land value maps, compiled in selected 3 European countries, are described
and compared, given such information about them like: name of map, bodies responsible for their
compilation, the area of the country covered with maps, payment for access to maps, the use of GIS
and CAMA and direct connection to the cadastre.

Keywords: the map of land prices, the land value map

1. Introduction
Land value maps are compiled in most European countries for decade. These maps contain
information about the average value of land within a given area. They are often constructed in the
process of mass appraisal for taxation purposes. They are used for another public and private needs
too. They are named value zones maps, standard ground value maps as well as value maps.
Sometimes instead of average values of land there are average prices on the map. This kind
of map is named the price map or the map of average land transaction prices.
At the beginning land value maps were drawn in analog form. This process took a lot of
time and cost a lot. Nowadays computer mass appraisal methods and GIS are used in order to
compile these maps in a short time and cheaper. They allow to estimate property values as accurate
as possible by using mass valuation methods.

2. The map of average land transaction prices and the land value map in Poland
2.1. The map of average land transaction prices
The map of average land transaction prices is the new term in the polish legal regulations. It was
defined by the Decree of the Council of Ministers of October 3, 2011 on types of cartographic
thematic and special works. Following § 2 of the above act this map is to be generated in the digital
form and it is to present the diversification of average transaction prices of lands, assigned for
building purposes, and arable lands; this map should be based on the data collected by district
starosts in the registers of prices and property values, in statistical records, as well as on analyses
and lists, which characterise the property market for the entire country in relation to the basic,
three-level territorial division of the country. The task concerning preparation and distribution of
the above map was assigned to the Surveyor General of Poland. In the process of construction of the
map of average land transaction prices, this body co-operates with other public administration
bodies, in particular with district starosts, with the minister responsible for building issues, spatial
economy and housing and with the President of the Main Statistical Office.
The detailed rules concerning generation of the average land transaction prices have not
been developed yet. As it results from the above mentioned § 2 of the Decree, the average land price
should be determined for a municipalities, separately for lands assigned for building purposes and
for arable lands. The average price for the areas assigned for building purposes may be calculated
on the basis of transaction prices of non-built up properties, which are to be built-up with buildings
other than farm type buildings and, the average price of arable lands should be based on
transaction prices on non-built-up arable properties. Transaction prices of both types of properties
are stored in the register of prices and values of properties.
It is required to determine the average price. It may be determined, among others, as:
1) the arithmetical mean for the set of all unit transaction prices of the given property type for the
assumed period,

84
2) the arithmetical mean for the set of unit typical transaction prices of the given property type for
the assumed period. This means the necessity to determine the interval of typical unit prices. This
interval may be defined, among others:
a) on the basis of the arithmetic mean and the standard deviation,
b) as the interval of confidence of the arithmetical mean.
3) the median of the set all unit transaction prices of the given property type for the assumed
period.
In 2012 the Surveyor General of Poland commenced the activities aiming at development of
the map of average land transaction prices. At present, they are in the preliminary phase of
implementation.

2.2. The land value map

The land value map is the cartographic product, similar to the map of average land transaction
prices, since it presents the value of lands. However, the maps present the different types of values.
In the case of the land value map they are the (market, cadastral) values and not the average prices.
Those values refer to lands located within a given area, which expansion is relatively smaller than
the area of a municipality.
In Poland this term has not been defined yet and the rules concerning creation of such
maps have not been determined. Regulations concerning taxation maps are the exception; they are
a particular type of land value maps (Budzyński 2011).
Comparing to other European Union countries, which are discussed further in the paper, in
Poland, the land value maps are, at present, seldom created. At the same time, scientific and
research works, aiming at elaboration of rules of construction of such maps, have been continued
(Cellmer, Kuryj 2003), (Źróbeket al. 2004), (Sawiłow2008), (Budzyński 2011).
The land value maps may be divided by the production technology into isoline maps, which
present the extension of values by means of isolines – the lines of the same value of lands and object
oriented maps, which present separate zones, characterised by the uniformity of factors influencing
the prices and thus, the value of lands (Źróbek et al. 2004). The rules of separation of those zones
depend on the assumed model or attribute approach. Further in this paper the basic rules of
creation of land value maps, according to the model approach discussed in (Źróbek et al. 2004), are
presented.
In the model approach, the boundaries of uniform zones are determined on the basis of
price generating factors – property market features of non-built-up properties, determined in the
process of analyses of the property market. This analysis is performed on the basis of collected data
concerning sales transaction, in the course of monitoring of the property market, which mostly
covers the area of a municipality. Boundaries of zones are generalised. Then, properties typical with
respect to price generating factors, are defined and described for determined uniform zones. The
last stage of generation of the land value map is determination of the unit value of the area of the
typical property, performed with the use of the prior constructed model.
Below the land value map for the area assigned for building purposes (one-family housing
area) for the locality (district) of Opacz Kolonia, neighbouring Warszawa, the capital of Poland. This
map was created as the object oriented map, in the model approach.

85
 Figure 1. The land value map for one-family housing area for the district of Opacz Kolonia.
Source: work by Tomasz Budzyński and Rafał Flieger.

As it was mentioned, the term “taxation map” is used in the Polish legal regulations; such
map is a particular type of the land value map. According to Art. 169 of the Act on property
management, taxation maps are created by the body which maintains the property cadastre, i.e. by
the district starost (the president of the city, which has the district rights), on the basis of valuation
of representative properties, performed by the property valuers. The starost, in co-operation with
the mayor, appropriate for the particular area, or the city president, makes the taxation maps
available for the public for the period of at least 21 days and information about the public
presentation is advertised in a way specified in this Article. Then everyone, who may be legally
interested in settlements resulting from the taxation maps may present any claims within the
period of public presentation of those maps. The submitted claims are considered by the starost
and presents them to the municipal council, appropriate for the area where the property is located,
together with the proposal of resolution, amending the taxation maps. The municipal council makes
the resolution concerning the assignment of the official force to the taxation maps, in which also
resolves the way of resolution of presented claims. Individuals which are not satisfied with the
method of resolution of the presented claims, have the right to submit their claims to the
administrative court. At the end of the discussed process the resolution of the municipal council
concerning the assignment of the official force to the taxation maps is advertised in the voivodship
(province) official journal.
It should be added that taxation tables, concerning buildings and premises, are also created
in the described process.
The taxation map is created on the cadastral map, with specification of boundaries of
taxation zones and their identifiers. The above taxation zones are the zones separated due to
similar factors, which influence the market value. It should be noticed that the unit land value of the

86
representative property in the given taxation zone is not presented on the taxation map; it is
presented in the list of the taxation zones. This list also includes: the identifier of the taxation zone,
the identifier of the cadastral parcel, the type of land, features of the representative property,
factors used for correction the differences between the features of the representative property and
features of other properties in the given taxation zone and unit cadastral values of particular land
parcels.

3. Land value maps in chosen European countries

3.1. Sweden
In Sweden land value maps named value zones maps are compiled in the process of real
property taxation - general real property assessment for taxation purposes. Above process is
regulated by The Property Assessment Act and The Property Assessment Ordinance (Roos 2006).
The Swedish authority that is responsible for the taxation of real property is The National
Tax Board. As a complement to the legislation, The National Tax Board publishes instructions and
general advice to support taxation activities (Roos 2006).
Lantmäteriet (National Land Survey of Sweden) plays important role, especially in the first
stage of taxation - preparatory work, being responsible for most of the technical part of the
assessment work. During this stage value zones maps are compiled.
The preparatory work in which the authorized valuers are engaged and which precedes the
tax assessment can be divided into the following processes:
- Following up and evaluating the previous tax assessment concerning division into value zones;
- Examining and sorting out unwanted materials in the area-related compiled price data;
- Describing standard properties and collecting other relevant information concerning the real
property market;
- Carrying out test assessment and formulating recommendations for the division into value zones
and standard levels (Roos 2006).
According to present law regulation, which was introduced in 2003, all real properties are
subject to a general real property tax assessment every sixth year, followed by a simplified
assessment three years later (Roos 2006). All of them are divided into the following different types
of property unit: single-family housing units, agricultural units, apartment building units, industrial
and other units, in order that all 3.2 million real properties will not be assessed during the same
year. So, in short, the maps cover the entire country and are compiled in different time, depending
on thetype of real estate.
The assessed values are75% of the market value for the reference-level year - two years
prior to the tax year.
During the preparatory work, concerning particularly single-family housing units, GIS is
used to improve the quality and increase the efficiency of the work processes. GIS is applied, inter
alia, for: examination and sorting out of purchases, describing the typical single-family house,
overview of the division into value zones and test assessment (Roos 2006).
In Sweden the assessed values and basis for valuation - inter alia value zones maps, are
included in Taxation Register, which is integrated with Real Property Register (the Physical
cadastre) and Land Register within Swedish Integrated Cadastral System (Lauri 2001). So land
value maps are connected with cadastre in Sweden. Access to Swedish Integrated Cadastral System,
including land value maps, is via internet. It is free of charge.

87
 Figure 2. Excerpt of value zones map.
Source:Hofren, 2009.

3.2. Germany
In Germany land value map is named a standard ground value map (“Bodenrichtwerte”)
(Kertscher 2008). The bodies, which are responsible for compiling this kind of map, are the
committees of experts on real estate values (“Gutachterausschüsse für grundstückswerte”)
(Kertscher 2009).
The tasks of these committees including “Bodenrichtwerte” are fixed in § 192 - § 199 in the
German Federal Building Code (“Baugesetzbuch”(BauGB)) (Seidel 2005).
These committees of experts were first introduced by “BauGB” in 1960. Their aim was and
still is to provide transparency in the real estate market in order to prevent excessive and
erroneous trends (Kertscher 2009).
The responsibility for the committee of experts generally lies with the federal state. Each
committee of experts covers a town or district. Its members are local real estate experts, such as
architects, building surveyors, estate agents, experts from banks and sworn experts. (Wanzke
2009).
Each committee of experts has an office, which is usually located at the land surveying and
cadastral office or the town planning office. The office receives copies of all real estate contracts
and the relevant information is fed into a purchase price database (“Kaufpreissammlung”).On this
basis, the committees of experts produce an annual publication of data in the form of a standard
ground value map (“Bodenrichtwerte”) and a real estate market report
(Grundstücksmarktberichte). They prepare valuation reports on fair market value and rent value
(Wanzke 2009).
Today, most the committees of experts prefer to make use of networking and GIS-
supported valuation-systems. (Kertscher 2007).
Standard ground values on the maps are adopted, updated and edited at each „1st of
January“. Types of adopted maps include: agricultural and forest areas, rural and urban areas with
the destination „built-up“, trade/industrial areas, traffic-areas, areas with special usage rights, e. g.
owner occupied flats or condominiums and rents if possible (Kertscher 2007).
Standard ground value maps are published by committees of experts in different form
mainly digital. They areavailableon CD orvia the Internet. In some cases there is charge for these
maps.

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 Figure 3. Screenshot of standard ground value map availablevia the Internet.
Source:committee of experts, map availablevia the Internet

From 2004, federal and state governments agreed to develop model projects for
implementing the national spatial data infrastructure. One of these model projects was the creation
of a national information system for standard ground values. The project was successfully launched
in NRW (North Rhine Westphalia) and was to be expanded to the remaining federal states. The
project, called “networked standard ground value information system” (VBORIS), defined the
integration of standard ground value information into a spatial data infrastructure.
BORIS.NRW(“BOdenRIchtwertinformationsSystem NRW”) includes inter alia the following
elements (Kertscher 2009):
- One common Internet portal to access all standard ground values in NRW. It allows an address
search by municipality, street name and house number or a geographical search by a series of
scales of different official maps;
- For each selected address the user receives a map section containing details of the relevant
standard ground values;
- The explanatory characteristics of the standard ground value can be activated through additional
functions;
- The user has the option of selecting one of the following map backgrounds: German Base Map
1:5000, Digital Topographic Map 1:10000, Topographic Map 1:50000, Local map 1:10000/20000;
- The standard ground values plus characteristics can be accessed free of charge;
- It is also possible to purchase an “official” printout of the relevant section of the standard ground
value map including explanations on letter-headed paper.
In 2008 BORIS. NRW has changed with the introduction of the enhanced version
BORISplus.NRW (Wanzke 2009).

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 Figure 4. Screenshot of BORISplus.NRW.
Source: Wanzke, 2009

3.3. Lithuania
In Lithuania land value maps are compiled in the process of mass appraisal for taxation
purposes. Mass appraisal gained legal status when the Law on Real Property Tax was passed.
Mass land valuation has been performed since 2001. From 2006 mass appraisal is
performed annuallyon the basis of market as of 1 August of each year. The body, which performs
mass appraisal for taxation purposes, including compiling value maps, is The State Enterprise
Centre of Registers, that was established in 1997. It stores and updates the real property cadastre
and register data, administers database of the real property cadastre and register, maintains GIS
system in Lithuania, and assesses real property for public needs, including taxation. Data about the
entire registered real property amounting to over 6,0 million objects is stored in the integrated
database. (Bagdonavicius, Deveikis 2011).
This database contains all real estates, located in Lithuania. All of them are subjects of mass
appraisal for taxation purposes, so land value maps cover the whole country.
In Lithuania in the process of mass appraisal including value maps CAMA and GIS are used.
Their application expand additionally the possibilities of mass valuation method and
increase the accuracy of values set during mass valuation (Bagdonavicius, Deveikis 2006).
The principle scheme of building land parcel valuation models and compiling value maps is
illustrated in Figure 5.

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Figure 5. The principle scheme of building land parcel valuation models and compiling value maps.
Source: Bagdonavicius, Deveikis, 2006.

The prepared land value maps and reports on mass land appraisal of municipal territories
are submitted to the Municipals Administrations and presented for public discussions. It is also
possible to find the results of mass land appraisal on the web site http://www.registrucentras.lt
(Bagdonavicius, Deveikis 2011).
An average market value of land and buildings estimated in the process of mass valuation
is publicly available free of charge. The results of mass valuation in Lithuania are used not only for
calculation of real property taxes, but also for other public purposes.

4. Conclusions
The paper presents the concepts of the map of average land transaction prices and the land
value map, which are included in the Polish legal acts as well as rules for compilation of these maps.
In Poland activities aiming at development of the map of average land transaction prices
are in the preliminary phase of implementation and the land value maps are seldom created. At the
same time, scientific and research works, aiming at elaboration of rules of construction of such
maps, have been continued.
Then in the paper land value maps, compiled in selected 3 European countries, are
described. Two of them – Sweden and Germany have extensive experience in this field. In the third
country - Lithuania land value maps have been compiled since 2001.
There are several similarities and differences between the maps of land value in above
countries.
In all of them CAMA and GIS are used in the preparation of the map as well as they are
availablevia the Internet.
Names of land value maps are different, depending on the country, in which they are
prepared. They are named value zones maps, standard ground value maps as well as value maps.
The bodies, which are responsible for compiling this kind of map, are state institutions in Sweden
and Lithuania and the committees of experts on real estate values,covering a town or district, in
Germany. In the case of Sweden and Lithuania, the entire country is covered with land value maps
which are connected to the cadastre, while in Germany these maps cover most of the country's area

91
and are not connected to the cadastre. In Sweden as well as Lithuania land value maps are available
free of charge in contrast to Germany where, in some cases, fees are charged.

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 4. PROPERTIES AS REVENUE SOURCES FOR
MUNICIPALITIES IN POLAND

Abstract
The aim of the paper is to present the legal regulations concerning municipal revenues, with special
focus on revenues generated by properties (incomes from assets, current revenues as well as
revenues from taxes and fees). The author presents changes in the level of local revenues and their
structure after 2003 (in 2004 a new Act on local governments’ revenues was passed). Furthermore,
she endeavors to assess the existing solutions in the light of ongoing changes within property
management.

Keywords: properties,real estates, municipal revenues, municipal budget, municipal property

management.

1. Introduction
The main (strategic) aim of managing municipal properties is the efficient use of subject
properties in the process of rendering public services by the municipality, i.e. meeting common
needs of the community by delivering local public goods [Trojanek, 1997]. Specific aims of property
management vary according to the functions properties serve (i.e. administrative, capital and public
utility), yet irrespective of specific purposes, the most fundamental aim of managing municipal
properties is their effective use while accomplishing municipal tasks.
The purpose of administrative properties is to provide suitable technical and organisational
conditions necessary for proper functioning of institutions and rendering services to customers.
Properties used for capital-related purposes, in turn, should serve as effective source of revenues
for the municipality’s (gmina’s) budget. Such aim may only be achieved if all resources have been
allocated in an optimal (effective) way with respect to socioeconomic conditions. This means that
properties should be made available for the institutions which will guarantee proper use in social
terms (and in line with the municipality’s policy), along with fair payment. The second aim of the
municipality’s property management is to supply land for developmental goals (land with service
infrastructure of settled legal status and optimal spatial structure). As this share of the stock is
subject to turnover between a municipality and other parties, the next goal of public property
management is to stabilize the local housing market. Managing public utility properties (e.g. town
greenery, sports and entertainment facilities, local roads) is mainly focused on providing sufficient
and good quality supply, and thus meeting the local society’s needs.
Activities related to properties located within the municipality’s borders, but belonging to
other entities constitute the second field of municipal property management. Municipalities’ role in
such situations is indirect, as opposed to managing their own properties. In such cases,
municipalities act as local hosts, local developmental and spatial policy authorities, for which
property management is one of the elements of the integrated and coherent development policy.
The strategic goal of property management with focus on the subject property stock, is
establishing and developing the local space in accordance with local development goals stipulated
in the study of land use and development, as well as in the municipality’s development strategy.
The aim is to provide the optimal functioning of the local socioeconomic system in conformity with
principles of sustainable development.
The aim of the study is to present the meaning of revenues generated by properties
(property income, current yield, revenues from taxes and fees) as well as to discuss changes in the
level and structure of these revenues after 2003 (in 2004 a new Act on local governments’ revenues
was passed). Furthermore, the author seeks to assess the meaning of the subject revenues in the
light of changes within property management.

2. Properties as sources of income

Among budgetary incomes, a great share of them is directly or indirectly connected with the
local authority policy of property management. Properties located within the municipality’s
borders, being part of its asset stock and those which are owned by other entities are the basic
source of income for municipalities. Revenues gained by municipalities from property management
come from various sources and are considerably differentiated.

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 The most fundamental legal acts concerning municipal revenues in Poland are:
1. The Constitution of the Republic of Poland of 23rd April 1997, as published in
DziennikUstaw (Journal of Laws) No. 78, item 483,
2. The European Charter of Local Self-Government as of 15th October 1985, as published in
Dziennik Ustaw in 1994, No. 124, item 608,
3. The Law on Public Finances as of 27th August 2009, as published in Dziennik Ustaw, No.
157, item 1240 with subsequent amendments,
4. Te Law of 13th November 2003 on Incomes of Local Self-government Entities, as published
in Dziennik Ustaw No. 203, item 1966 with subsequent amendments.

The legal regulations enabling municipalities to receive incomes comprise also acts defining
rules of calculation and collection of taxes, fees and other revenues, particularly:
1. The Act of 12th January 1991onlocal taxes and charges, as published in Dziennik Ustaw of
2006, No. 121, item 844 with subsequent amendments,
2. The Act of 30th October 2002 on Forest Tax, as published in Dziennik Ustaw of 2002, No.
200, item 1682 with subsequent amendments,
3. The Act of 28th July 1983 on inheritance and donation tax, as published in Dziennik Ustaw
of 2004, No. 142, item 1514 with subsequent amendments,
4. The Act of 15th October 1984 on Agricultural tax, as published in Dziennik Ustaw in 2009,
No. 94, item 1682 with subsequent amendments
5. The Act of 9th September 2000 on civil law transactions, consolidated text, as published in
Dziennik Ustaw in 2010, No. 101, item 649,
6. The Act of 16th 2006 on Stamp Duty, consolidated text, as published in Dziennik Ustaw in
2011, No. 171, item 1016.

There are many income classifications in the literature 8. From the point of view of theresearch
subject, the most appropriate is the typological criterion helping to distinguish two groups of
income:
1) revenues generated by properties owned by municipalities,
2) revenues generated by properties belonging to other entities.
The first group comprises:
- income from assets (property income) that includes revenue from:
 transformation of perpetual usufruct right into freehold right,
 paid acquisition of property and perpetual usufruct right, including sales of properties
(dwellings, commercial premises, plots of land),
- current yield involving payments for:
 perpetual usufruct,
 permanent management,
 use,
 initial fee for perpetual usufruct,
 other (e.g. land easement),
 property rental and leasehold.
Properties owned by other bodies than municipalities contribute to municipal budget through
tax revenues (property, agricultural and forest taxes), betterment levies or rezoning fees.
In the next part of the paper the author focused on the income sources mentioned above.

2.1. Income from assets (property income)

Revenues from perpetual usufruct, depending on the type of municipality, size, structure of the
stock, and management methods, are a stable income source for municipalities.
Municipalities receive revenues from perpetual usufruct through:
 perpetual usufruct payments (initial fee and annual payments),

8See e.g. A. Borodo, Samorząd Terytorialny. System prawno finansowy, Wyd. Lexis Nexis, Warszawa 2004, p. 129-132; L.
Patrzałek, Finanse samorządu terytorialnego, Wyd. AE Wrocław, Wrocław 2004, s.108-109; E. Ruśkowski, J.M. Sałachna,
Finanse lokalne po akcesji, wyd. 2, Oficyna Wolter Kluwer Business, Warszawa 2007, p. 152-154; M. Dylewski, B. Filipiak, M.
Gorzałczyńska – Koczkodan, Finanse Samorządowe. Narzędzia. Decyzje. Procesy, Wyd. PAN, Warszawa 2006, p.84; T. M.
Łaguna, Aktywne gospodarowanie nieruchomościami szansą zwiększenia wpływów dla budżetów gmin, in: Finanse
publiczne w skali lokalnej, M. Adamowicz (ed.), Wyd. SGGW, Warszawa 2002, p. 441-443; M. Miszczak, System podatków i
opłat samorządowych w Polsce, Wyd. C.H.Beck, Warszawa 2009, p. 18-42;

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  additional fees (10% of land value at the date of fixing the initial fee, if the usufructuary
misses the deadline to develop the land. Each extra year of delay results in raising the
penalty by further 10% of the value (art. 63 the Act on real estate management)
 selling freehold right to the usufructuary (on the basis of art. 32 of the Act on real estate
management or the Act on Converting usufruct right into freehold right),
 mutual settlements between municipalities and perpetual usufructuaries (remuneration
for buildings and other improvements raised or bought by usufructuaries); contract expiry
or termination before expiry date; return of initial fee in case of contract termination by
perpetual usufructuary, return of annual payments paid up front, should the period be
shorter than actually used one; recognition of outlays done by the usufructuary for
technical infrastructure while calculating difference between the previous and the
adjusted annual payment.
Revenues generated by rights mentioned above are differentiated. Annual payments, initial
fees along with income from selling the freehold right to perpetual usufructuary are among the
most essential.

2.1.1. Income from initial fees (i.e. first payment) and annual payments
For land subject to perpetual usufruct an initial fee and annual payments are charged
(according to the Act on real estate management as of 21 August 1997 – art. 711). They are
fixed as percentage share of price of the plot, calculated on the basis of art. 67 of the Act
mentioned above, i.e. the price estimated on the basis of value. If the plot of land is granted to a
perpetual usufructuary by tender, the basis for calculating fees and payments is the price
agreed in the auction (tender). If the right is granted in a no-bid procedure, the basis for
calculation of initial and annual payments is the price of property calculated on the level no
lower than its market value. Percentage rates of initial and annual payments are differentiated
and depend on the purpose stipulated in the contract. The initial fee ranges from 15% to 20%
of the price of the land. The annual fees may be e.g. (art. 72, item 3):
 0,3% of price in case land granted for military purposes (country’s defences),
safety including fire-fighting,
 0,3% of price in case land granted for charity, non-profit, cultural, medical,
educational, scientific or research and development activities,
 1% of price in case land granted for agricultural purposes,
 1% of price in case land granted for housing, technical infrastructure, other public
purposes, and sports facilities,
 2% of price in case land granted for tourist activities,
 2% of price in case other land.
Annual payments may be increased (art. 76.1) by a Voivode (in case of land owned
by the State Treasury) or by a resolution of a proper council (in case of land belonging to
local governments). The percentage rate of annual payments may be increased before the
land becomes subject to perpetual usufruct.
A proper body may grant a discount from the initial and annual payments (art. 73,
item 2a, point 3 of the Act on real estate management). Initial fee is paid in the year of
granting perpetual usufruct, while annual payments are done throughout the contract
duration, latest 31st March each year, paid up front.
To sum up, revenues from the described sources depend on:
 legal regulations that municipalities cannot influence (percentage rates of
payments),
 prices agreed in tenders or values of properties granted in perpetual usufruct in a
no-bid procedure,
 taken resolutions concerning granting discounts from fixed payments.
Annual payments for perpetual usufruct change in time and reflect changes in land value.
According to art. 77 item 1 of the Act on real estate management annual payments for perpetual
usufruct are adjusted though not more often than once in three years with the provision that the
value of the property changed. A revalued (i.e. adjusted) annual fee is established on the basis of the
former percentage rate applied to the value of the property on the date of revaluation. A special
regulation applies if the following situations occur:
1) the value of the property on the date of revaluation is lower than the price agreed in the
tender on the date of granting it in perpetual usufruct – in this case the adjustment is
groundless and should not be done. This regulation applies to properties subject to

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 perpetual usufruct granted for housing purposes in the period of 5 years, counting from the
day when the contract for perpetual usufruct was entered (art. 77 item 2 of the Act on real
estate management).
2) the revalued (adjusted) rate of annual payment is double or more the previous rate. In such
case the perpetual usufructuary is charged double the previous amount and the remaining
sum is to be paid in two equal installments, which increase annual payments in two
consecutive years.
The revaluation of annual payments is done ex officio or when applied for by the perpetual
usufructuary (whose purpose is usually to lower the value of the property).
In the light of the solutions mentioned above, the adjustment of annual payments for
perpetual usufruct is to be conducted:
 not more often than once every 3 years,
 provided that the value of the property changed.

2.1.2 Revenues from transferring perpetual usufruct into freehold right

According to the law, transforming perpetual usufruct into freehold (ownership) right may
take two forms and is regulated by:
1. The Act on real estate management of 21st August 1997, as published in Dziennik Ustaw of
2010, No. 102, item 651 (civil law form),
2. The Act on Conversion of perpetual usufruct into freehold right of 29th July 2005, as
published in Dziennik Ustaw No. 175, item 1459 with subsequent amendments
(administrative and legal form).
Under the Act on real estate management, art. 32, a land property subject to perpetual usufruct
may only be sold to the perpetual usufructuary in a no-bid sale. The amount equal to the value of
perpetual usufruct right is calculated for the valuation date and recognized against the payment.
Thus, the act enabled the State Treasury or self-governments to sell land properties to the
perpetual usufructuary. The transformation of the perpetual usufruct right into ownership may
also be requested by natural persons (the Act on 4th September 1997, Dz.U. of 1997, No. 123, item
781 and Dz. U. of 1998, No. 106, item 668 and 156, item 1020). The act has been amended many
times hereafter, provoking discussion about the legitimacy and need for perpetual usufruct right,
and the solutions it brought were subject to judgements of the Polish Constitutional Tribunal 9.
Without presenting detailed solutions, it is worth mentioning the most controversial ones:
- initially, the act (as of 4th September 1997) permitted the conversion of rights only in case
of natural persons who obtained the perpetual usufruct right before the date (and no later)
of announcement of the act and who applied for the transformation up to 31 December
2000;
- incompatibility between the subject act and the Constitution (i.e. regulations on rules
concerning calculation of fee for the transformation). According to art. 5, the amount of the
transformation fee was dependent on the span of the right. The fee was paid in
installments for:
a) 15 years – if the perpetual usufruct lasted 5 years or less,
b) 10 years – if the perpetual usufruct lasted more than 5 years, but less than 20 years,
c) 5 years - the perpetual usufruct lasted 20 years or more.
The solutions concerning payment were questioned by municipalities which emphasized the
fact that the transformation of perpetual usufruct into freehold right for natural persons was
conducted without any compensation (under the Constitution, the compensation should be equal to
market value), and contributed significantly to deteriorating municipalities’ financial condition
(see: H. Cioch, H.Witczak, Przekształcenie prawa użytkowania wieczystego. Komentarz, Difin,
Warszawa 2002). The act was amended on 28th July 2001 and an important change was introduced,
i.e., according to art. 4a, the fee was determined in compliance with art. 67, item 1, art. 69 and 70,
item 2-4 of the Act on real estate management. As a consequence of changes regarding the fee for
conversion of perpetual usufruct right, it was necessary for the buyer to pay the difference between
the price as evaluated by the chartered surveyor and the value of the right of perpetual usufruct
calculated for the property in its condition on the date of transformation.
Another attempt to adjust the legal regulations concerning transformation of
perpetual usufruct right into ownership was passing the Act on Conversion of Perpetual
Usufruct into Freehold right of 29th July 2005, as published in Dziennik Ustaw No. 175, item

9
see: Bieniek G.,Rudnicki S. (2007), „Nieruchomości. Problematyka prawna”, LexisNexis, Warszawa, p. 835 and further

96
 1459 with subsequent amendments in 2009, 2010 and 2011. On 13 October 2005 the previous
solutions were repealed.
The content of the act diverges considerably from previous regulations. The most
important changes comprise:
- extension of right to demand the transformation of perpetual usufruct into freehold right
on legal persons (with some reservations) that on the date 13 th October 2005were
perpetual usufructaries;
- the fee for transformation of rights is calculated on the basis of market rules. Regulations
mentioned in art. 67 item 3a and art.69 of the Act on real estate management apply here;
- new rules for calculating discounts from conversion fee of perpetual usufruct into freehold
right;
- the list of entities who are exempted from paying transformation fee.
The act of 2005 was subject to many amendments. The most essential changes were introduced
on 7th September 2007 in the Amendment concerning changes to the Act on conversion of
perpetual usufruct into freehold right and some other acts (Dziennik Ustaw No. 191, item 1371)
and the Act of 28th July 2011 on changes of the Act on real estate management (Dziennik Ustaw No.
187, item 1110).
The changes introduced to the Act on Conversion of Perpetual Usufruct into Freehold right
resulted in:
- extension of the list of entities eligible to demand transformation of perpetual usufruct into
freehold right,
- cancelation of limitations as to which properties may be subject to transformation of rights,
- cancelation of time limitation,
conversion of perpetual usufruct into freehold right for a fee. The fee is calculated by
the proper entity as a difference between the price as evaluated by the chartered
surveyor and the value of the right of perpetual usufruct calculated for the property in
its condition on the date of transformation. The body that makes decision about the
transformation may (or may not) grant a discount.

2.1.3 Revenues from selling properties

Sales of properties which belong to municipalities is regulated by the Act on real estate
management (further called the Act) and the Civil Code (art. 535-602). According to art. 13 of the
Act, properties owned by a municipality can be subject of transaction, particularly sales. Sales of
real estate by the municipality can take place in one of the two possible methods: by tender or
without tender, through competitive negotiations with the buyer. The rule stipulated in art. 28 of
the Act concerns sales of real estate by tender. According to the Act on real estate management (art.
37, item 2), tender procedures may be waived (and the rules of competitive negotiations applied) in
certain cases.
Among the entities entitled to purchase local properties without tender procedures, the
group of persons having statutory priority to buy a particular property (the Property Management
Act art. 37) seems to be noteworthy. These people are usually tenants of municipality-owned
rented apartments. If a property is to be sold to a sitting tenant, the tenant should be notified about
his/her statutory priority (in accordance with the Act on real estate management). The purchasing
price is calculated on the basis of market value. A proper body may grant a discount through a
resolution. The amount of the discount depends on the municipality and may be applied in case of
properties belonging to the municipality. In case when the buyer of a previously municipality-
owned property sells it or uses it inappropriately within 5 years, he/she is obliged to refund the
discount after indexation.
From the point of view of municipal income important are the rules of setting price of
properties, as stipulated in the Act and the Regulation of the Council of Ministers from the 21 st
September 2004 on real estate appraisal and valuation report. The price of property which is to be
sold is appraised on the basis of the value of the real estate evaluated by the certified property
valuer, according the regulations. Article 67 introduces the main rule concerning the appraisal: in a
no-bid sale, the price of property cannot be lower than the value appraised by the property valuer,
the asking price in the first tender is no lower than the property’s value. If the first tender
concludes undecided, the asking price in the second tender may be lower than the property’s value,
yet not less than 50% of the value. If the second tender concludes undecided, the price of the
property is defined after competitive negotiations with the prospective buyer, yet it is no less than
40% of the property value.

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 2.2. Current yield
Within the group of current yields, particularly important are payments (annual payments and
initial fee were discussed above), revenues from rental and leasehold, as well as granting
permanent management right to or use of municipal land.

2.2.1 Revenue from property rental or lease

According to the Act, local government units, acting in the area of relations under civil law can
grant to individual persons and legal entities the right to use their properties, particularly to rent
them out or lease them. Legal regulations of rent and lease contracts, as an institution of civil law,
are included in the regulations of the Civil Code (art. 659-709). Special ruling which regulates
renting of municipal properties is the Act of 21st June 2001 on protection of tenants, local housing
stock and change in the Civil Code (Dz. U. from 2001, no 71, item 733 with further amendments).
Art. 4 of the Act imposes as municipalities’ own task, the obligation to create conditions to satisfy
housing needs of low-income households. The municipality, according to the rules and in cases
defined in the Act, satisfies housing needs of the households with low income, provides social
housing and substitute accommodation. Municipalities, realizing the tasks imposed on them,
provide the social and substitute housing from the local housing stock, through rental agreements.
Apart for that, the municipality enters agreements on renting of business premises, trying to take
into account the best form of the local stock management. Entering rental or lease agreement by the
municipality occurs only in the written form. Rights to properties are granted by municipalities in
two forms: by tender or without tender. In case of business premises the method of tender is
obligatory. The competences of the municipality council include defining the rules of renting
premises which are part of the local housing stock. Rent rates in the premises are set by head of
municipality who should into accountthe aim and plan for themunicipal housing stock
management, e.g. the rules of rental policy. He/she should take into consideration the factors which
increase or decrease value of the premises, such as location of the premises in the building,
furnishing, building fittings, its technical infrastructure, including installation and their general
condition, and the general technical condition of the building. Rent increase must not be done not
more often than every 6 months. In the municipal housing stock the obligatory method is regulated
tenancy – the rent level must not exceed 3% of the premises replacement value. Replacement value
of the premises is calculated by multiplying its usable area and the conversion factor of the
replacement cost of 1m² of usable area of business space of the building. The factor is announced
every 6 months in the regional official journal, by the voivode in the form of announcement for
particular districts on the area of the region (voivodeship).

2.2.2 Income from granting properties for permanent administration

Basic legal regulations defining the rules and methods of granting properties for
permanent administration and the methods of determining values of properties are included in the
regulations of the Act and the Regulation of the Council of Ministers on detailed methods of
property valuation and valuation report. Permanent administration is a legal form of managing
properties which is the property of the State Treasure or Local Government Units, by the state and
local organizational units which are not legal entities, for the defined or undefined time. Annual fees
are collected for the real estate granted for permanent administration. The level of annual fees,
discounts and methods of payment are included in the decision. Fees for the permanent
administration are determined according to the percentage rate from the price of the real estate, on
the level not lower than the value. The level of percentage rate of annual fees depends on the
purpose of the granted real estate. The level of the annual fee for permanent administration may be
updated, not more often than every year, if the value of property changes. Updated annual fee is
appraised according to the current percentage rate from the value of the real estate defined for the
day of fee update. Update of the annual fee is made automatically or at the request of organizational
unit, on the basis of real estate value appraised by the property valuer. Update of the fee is made by
the appropriate unit after the administrative decision. New level of the fee comes into force from
the 1st of January of the year following the year in which the decision became valid.

2.2.3 Revenues from land use

Land use is a limited right burdening an asset (art. 252-284 of the Civil Code). The subject of
land use right is the entire property, or its part. Land use expires in case of renouncement,
purchasing of an asset by the user, his/her death, liquidation of farming cooperative leasing land

98
from the State Treasury, or not exercising the right for 10 years. Land use is an individual law, i.e.
tightly connected with the user. It means that this right is inalienable.

3. Municipal revenues from properties belonging to other entities

3.1 Revenues from property tax
In Poland, just as in other East-Central countries, France and Great Britain, property tax is a
basic local tax playing major role in municipal budgets and constituting an essential source of
income [P. Swianiewicz, Finanse samorządowe. Koncepcje realizacji, polityki lokalne, ed.
MUNICIPUM S.A., Warszawa 2011].
The tax bases are: for land - area, for buildings or their parts – usable floor area, for
structures or their parts connected with conducting business activity – value as of 1st January of
tax year, being basis for calculating depreciation in this year, not reduced by write-offs; if there are
no write offs from constructions or their parts, the tax base is market value estimated by the tax
payer. Tax rates are defined by municipal councils; however, their level cannot exceed maximum
levels determined by the Minister of Finance in the form of announcement in the Official Journal of
Poland “Monitor Polski”. As an example, in 2013 maximal tax rates of property tax are as follows:
 buildings and their parts connected with conducting business activity – 22,82 zł/m2,
 houses or their parts – 0,73 zł/m2,
 other buildings and their parts – 7,66 zł/m2,
 land connected with conducting business activity irrespective of its position in Land and
Property Register – 0,88 zł/m 2,
 other land e.g. plots for housing – 0,45 zł/m2,
 structures – 2% of value,
 buildings and their parts used for healthcare provision – 4,63 zł/m2,
It is the municipal council’s duty to determine levels of tax rates for properties mentioned
above. Municipal councils can diversify levels of tax rates for different types of subjects to taxation
considering their:
 location,
 planned and actual land use,
 type of building development,
 type of business activity.
Maximal rates of property tax change annually according to inflation.
The legislator (art. 7 of the Act of 12th January 1991onlocal taxes and charges, as
published in Dziennik Ustaw in 2006, No. 121, item 844 with subsequent amendments) provided for
subject and object tax exemptions. The object exemptions comprise e.g.:
 structures which are part of railway infrastructure and land on which the
infrastructure is located, provided that its administrators are obliged to make it
available for licensed rail operators,
 land, buildings and structures left after closing down of rail routes or stretches until
transferring the freehold or perpetual usufruct right – no longer than 3 years from 1st
day of the month following the month when a definite decision was announced,
 structures which are part of port infrastructure, structures of infrastructure on entries
to ports and land on which the infrastructure is located,
 buildings and structures and land on which they are located on airport areas for
public use,
 other, listed in the article mentioned.
Among subject exemptions, the following subjects may benefit:
 universities (excluding subjects to taxation used for business activities),
 schools, their local branches, education centres, teacher training institutions as well as
bodies managing or using or being perpetual usufructuaries of subject properties,
 research centres of the Polish academy of Sciences (PAN),
 supported employment enterprises,
 research and development institutions,
 research and development enterprises – concerns subjects to taxation which are used
for research and development activity.
Moreover, apart from exemptions listed in the Act of 12th January 1991onlocal taxes and
charges, other acts provide for various exemptions:

99
  tax exemptions and reliefs available for church legal entities that are owners of
perpetual usufructuaries of land used for other purposes than housing and business
activities,
 reliefs granted for business enterprises run in special business zones,
 reliefs related to land and buildings being part of properties to be used for public
roads, purchased by the State Treasury or local governments.
However, municipalities must obey to maximal tax rates which must not be exceeded. Most
municipalities set the rates at maximal levels or close to them. Irrespective of property location,
standard, technical condition and other essential characteristics, incidence of tax is identical.
Therefore, it does not matter whether it refers to a new building in good location, or a dilapidated
building in the suburbs.
In the current state of the law, municipalities have the right to differentiate tax rates, yet
they rarely use this possibility, as it is difficult to create a fair taxation system. Property tax rates in
Poland do not show any connection to the value of subjects to taxation (value of properties). This
fact has been treated as an argument for ad valorem tax since the beginning of the system
transformation.

3.2. The concept of ad valorem property tax

The legally binding property, agricultural and forest tax are to be replaced by ad valorem property
tax whose base is cadastral value of properties. Introduction of this tax demands defining the
subject, payer and tax base, as well as setting rates. These issues are subject to legal regulations
(Art. 151, item 3 of the Act on Real Estate Management as of 21 st August 1997, as published in
Dziennik Ustaw of 2000, No. 46, item 543 with amendments) and ongoing discussions.
Cadastral value of a property is a value assessed in the process of universal taxation of
properties. It is reached by valuing typical properties of various property types in a municipality.
Value of typical properties is calculated on the basis of prices from transactions entered within the
municipality, and in case of small number of those – transaction prices in neighbouring
municipalities.
Cadastral values assessed in the process of universal taxation should reflect differences
between certain types of properties and they should be as close as possible to market values, taking
into consideration the rules for mass property valuation. It is assumed that cadastral value will not
be affected by economic fluctuations and abrupt changes of prices 10.
In order to calculate cadastral values of properties an integrated system should be created. A
modern cadastral system should enable clerks to easily enter data on transactions, process them
and exchange information on properties. The information should be gathered both about land and
its parts (buildings, dwellings, structures).
Property tax is a local tax constituting an important revenue source for municipalities. The
calculation method that has been used so far may be described as simple. The tax base is area of
land or building, or conversion area (agricultural tax), as for structures – it is their value (2% of
value assessed on the basis of art. 4, item 1, point 3 and items 3-7).
Calculating ad valorem tax requires conducting regular universal taxation and property
revaluation that is both time-consuming and expensive. Furthermore, introducing ad valorem
property tax entails gathering appropriate information on the housing market, as it is now
fragmentary and insufficient.
Introducing cadastral tax may potentially increase municipal revenues and lead to considerable
differentiation of their meaning in various types of municipalities. The increase may result from the
fact that in some municipalities there are buildings, structures or land that are unrecorded and not
bringing any tax income. Moreover, municipalities may benefit from significant spatial
differentiation of values of properties boasting the same functions and characteristics.
The next argument in favour of ad valorem property tax is the equal and fair tax levy rule. In
the current system of law, possessing property irrespective of its location (and thus value) entails
equal tax incidence. Level of taxes on wealth, including property tax, should depend on the value of
the wealth. The binding regulations contradict this rule.
Imposing ad valorem property tax will result in a more effective management of properties and
their optimal use (with concern to their value). Making property tax level conditional on the
property value enables the authorities to relate tax levy to the taxpayer’s financial ability. Property

10Moreover, with reference to commonly used systems of ad valorem taxation in many countries, it is currently a broadly
discussed issue to levy tax not on cadastral value but its part. However, systems used in other countries, as well as proposals
considered in Poland are not subject of this paper.

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tax is a cost to entrepreneurs and charge for others for possessing properties. The final argument
for introducing ad valorem property tax is the need to adapt Polish regulations to the ones binding
in the European Union.
The arguments for and against introducing ad valorem property tax may be evaluated from the
perspective of aims that may be reached on the fields of fiscal policy, spatial planning and social
acceptance.
Ad valorem property tax in comparison with the tax currently binding:
 is more complicated to calculate,
 entails higher costs of introduction,
 is more effective with respect to fiscal function,
 may contribute to greater differentiation of roles played by this tax in generating
revenues in municipalities of different types,
 is perceived by society as fairer,
 results in managing the property in a more effective way and optimal space use.

3.3. Revenues from agricultural tax

The legal basis for collecting revenues from agricultural tax is the Act of 15 th November
1984 on Agricultural Tax, as published in Dziennik Ustaw of 2009, No. 56 with subsequent
amendments. The subjects to taxation are plots of land classified in the land and property register
as arable land or woods on arable land, excluding land used for non-agricultural activities.
The tax base for agricultural tax is: for farming enterprises - number of conversion hectares
fixed on the basis of area, types and classes of arable land recorded in the land and property register
for different tax districts, for other plots of land – area in hectares recorded in the land and property
register.
The number of conversion hectares is dependent on:
 area of the farm,
 type and class of arable land,
 tax district where the municipality with the subject farm is located.
A conversion hectare is a rough measure of average profitability of 1 ha in a given area. The
table below presents conversion indicators of use values of land. It serves as a basis for calculating
agricultural tax,
Table 1.
Conversions for arable land
Type of arable
Arable land Meadows and pastures
land
Tax districts I H II IV I II III IV
Classes of arable
Conversions
land
I 1,95 1,80 1,65 1,45 1,75 1,60 1,45 1,35
II 1,80 1,65 1,50 1,35 1,45 1,35 1,25 1,10
IIIa 1,65 1,50 1,40 1,25
III 1,25 1,15 1,05 0,95
IIIb 1,35 1,25 1,15 1,00
IVa 1,10 1,00 0,90 0,80
IV 0,75 0,70 0,60 0,55
IVb 0,80 0,75 0,65 0,60
V 0,35 0,30 0,25 0,20 0,20 0,20 0,15 0,15
VI 0,20 0,15 0,10 0,05 0,15 0,15 0,10 0,05
Source:

Agricultural tax for a tax year is: a money equivalent of 2,5 quintals of rye for 1 ha of
farming land, for 1 ha other land - money equivalent of 5 quintals of rye (calculated according to
average purchasing price of rye in the three quarters preceding the tax year). The average price of
rye is announced by the head of the Central Statistical Office of Poland. Municipal councils are

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allowed to lower purchasing prices of rye being basis for calculation of agricultural tax on the area
of the municipality. Art. 12, point 1 of the subject Act lists types of agricultural land exempt from
the tax (object exemption), including arable land of class V, and VI, woods on arable land, land
located in the area of border strip; agricultural land, meadows and pastures subject to
melioration – in the year when crops were destroyed by drainage works; ecological sites. Art.
12.2. of the Act introduces subject exemptions. There are four types of tax reliefs:
 investment relief – amounts to 25% of documented financial outlays on
building or modernizing buildings and constructions serving environmental
protection,
 military relief - amounts to 60% for farmers who own agricultural land and are
serving in the military or long-term military training. If the farmer’s family
member is serving in the military, the relief is 40%,
 “mountain” relief – beneficiaries are farmers whose land is located in the
submontane area or in the mountains (towns located higher than 350 m.a.s.l.).
The tax is lowered by 30% - 60% depending on valuation class of the land,
 relief due to natural disasters – applicable in case of natural disasters that
afflicted buildings, crops, livestock, deadstock or wood stand.
3.4 Revenues from forest tax
The legal basis for collecting revenues from forest tax is the Act of 20th October 2002
on forest tax, No. 200, item 1682 with subsequent amendments. The subjects to taxation are forests
listed in the Act, excluding land used for non-forest activities.
The taxpayers are individual people, legal entities, and organizational units without legal entity,
which are owners or owner-like possessors of forests, perpetual usufructuaries of forests owned by
the State Treasury or territorial self-government units.
The tax base is area of the forest expressed in hectares, recorded in the land and property
register. The tax rate is equivalent to 0,220 m3 of wood, calculated according to average price of
wood sales, obtained by the forest district for the three first quarters of the year preceding the tax
year. The average selling price of wood is calculated on the basis of announcement by the head of
the Central Statistical Office of Poland. Municipal councils may by resolution lower purchasing
prices of wood being basis for calculation of forest tax on the area of the municipality. Art. 7.1 lists
object exemptions from the tax for:
 forests with stand younger than 40 years old,
 single forests recorded in the monument registry,
 ecological sites.
The art. 7.2. comprises object exemptions, yet municipal councils can by resolution grant
other object exemptions covering certain forest stand than stipulated in the act.
Subject exemptions from forest tax comprise e.g.:
 universities, colleges of professional education, military academies,
 research centres of the Polish Academy of Sciences (PAN),
 supported employment enterprises,
 research and development institutions,
 schools, their local branches, education centres, teacher training institutions as well as
bodies managing or using or being perpetual usufructuaries of the subject properties.

3.5 Revenues from zoning fees

The legal basis for collecting revenues from forest tax is the Act on Special Planning and Land
Development as of 27th March 2003, Dziennik Ustaw no. 80, item 717. According to art. 36.4 of the
Act, zoning fee (known also as re-zoning fee) is an own revenue of municipality. It is a charge paid
to municipality for change in property value as a result of changes to or introduction of the local
area development plan. If the property value increases after the plan has been introduced or
changed, and the owner or perpetual usufructuary sells the property up to 5 years from the date
the changes or introduction became binding, the head of municipality (city mayor) charges a one-
time fee according to percentage rate set in the plan, yet no more than 30%.
The percentage rate of zoning fee is set by the municipal council by resolution concerning
introduction or change to the local area development plan. The zoning fee rate cannot be set
individually for each property, if the changes adopted by the plan affect more than one property.
The fee is calculated as a percentage rate of the property value increase. Increase or decrease in
property value is equal to the difference between the new property value (after adopting the plan)
and the previous property value (due before the change of the plan). It is essential, that in the

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valuation process the condition (state) of the property should be valued at the date when the
introduction or change to the plan become effective, and the level of prices – at the date of selling
the property.

3.6 Revenues from betterment levies

The legal basis for charging betterment levies is the Act on real estate management.
Betterment levies are charges paid to municipality for increase in property value due to the local
governments’ activities causing “development of properties” and thus property value growth.
According to the Act on real estate management, betterment levies are set in three situations:
division of property, consolidation and division process conducted by municipalities, building
technical infrastructure fittings with use of subsidies from the State Treasury, local government
units, sources from the European Union budget or non-returnable foreign sources of financing.
According to art. 98.4 of the Act on real estate management, if the value of the property
increases after its division, the head of municipality (city mayor) can by resolution set a betterment
levy. The obligation to pay the fee burdens owners and perpetual usufructuaries. The percentage
rate is set by the municipal council at the level no higher than 30% of the increase in value. The
value is calculated by a chartered surveyor according to the condition (state) of the property before
and after the division, on the basis of prices relevant at the date of issuing the decision to charge
betterment levy.
The owners and perpetual usufructuaries of properties covered by consolidation and
division procedure are obliged to pay the municipality 50% of the increase in property value
caused by consolidation and division procedure. While valuing properties before consolidation and
division, the valuer does not take into account the value of devices and woods for which the
municipality paid compensation. The percentage rate of betterment levy is decided by the
municipal council by resolution concerning consolidation and division of properties.
According to art. 145 of the Act on real estate management, the head of municipality can
take a decision to charge betterment levy each time a road is made or modernized or when the
property gains access to certain types of technical infrastructure. This fee is a result of common
participation of beneficiaries (the municipality and property owners) in the cost of building
technical infrastructure facilities. Betterment levy can be imposed up to three years after making or
modernizing the road or gaining access to certain types of technical infrastructure. The levy
depends on the increase in property value caused by building new technical infrastructure fittings.
Its level must not exceed 50% of the difference between the value of a property before and after
building the fittings. The percentage rate is set by the municipal council by resolution. The value of
the property before and after building the fittings is calculated by a chartered surveyor according to
the property condition (state) at the date of issuing the decision to charge a betterment levy.

4. The meaning of property-based revenues in municipal budgets

Basic municipal revenues (in 2011) comprised:
 own revenues - 45,6% ,
 subvention - 30,7%,
 designated grants - 23,7%.
Changes in share of particular income sources of local governments (in regions, counties
and municipalities) in total revenues in the period 2003-2011 are presented in the table below
(Table 2).

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 Table 2.
Share of particular income sources of local governments (in regions, counties and
municipalities) in total revenues in the years 2003-2011
Revenues of local Own
Designated Subvention
Year governments revenues
grant [%] [%]
[bill. PLN] [%]
2003 79,1 43,5 16,4 40,1
2004 91,5 51,5 14,3 34,2
2005 102,9 53,3 15,1 31,6
2006 117,0 53,7 16,8 29,5
2007 131,4 52,3 19,7 28,0
2008 142,6 54,9 16,6 28,5
2009 154,8 48,6 22,1 29,3
2010 162,8 48,3 22,7 29,0
2011 171,2 48,8 23,0 28,2
Source: Own study based on: M. Podstawka (ed.), Finanse, PWN publishing house, Warszawa 2010,
p. 159 and the report Gospodarka finansowa jednostek samorządu terytorialnego by the Polish
Central Statistical Office, Warszawa 2011

The total increase of revenues in 2011 amounted to 5,2% and was lower than the average
growth rate in the period 2003-2011 (over 10%). Since 2008 the increase of revenues has been
slower and slower, which is partially connected with the economic slowdown. Furthermore, share
of own revenues has been decreasing, while subventions and designated grants have been growing.
Depending on the municipality type (urban, urban-rural, rural), the structure of incomes is
differentiated.

Table 3.
Structure [%] of municipal revenues in 2011.
Type of municipality
Revenue sources
urban urban-rural rural
1. Own revenues 58,6 47,4 37,1
2. Subvention 19,8 29,3 37,4
3. Designated grants 21,5 23,2 25,5
Source: own study based on data from the Ministry of Finance.

It turns out that the rural municipalities had the least favourable revenue structure in
2011. Significant share of subventions and designated grants in total municipal revenues makes
municipalities dependent on transfers from the central budget.
Among own revenues, the significant share belongs to properties, i.e. incomes generated by
properties owned by municipalities and properties that belong to other entities. Due to data
collection techniques and data accessibility in the state registries, in the next part of the study the
author discussed the meaning of revenues from:
 property tax,
 agricultural tax,
 forest tax,
 municipal assets.
Thus the calculations below do not comprise all property-based revenues, such as
betterment levies or zoning fees. However, it does not distort the structure of own revenues, as
municipalities use these instruments to a varying extent. As an example, the share of income from
betterment levies in total revenues was:
- in Poznań - 0,045% (2012),
- in Głogów - 0,008% (2010),
- in Bydgoszcz - 0,009% (2011)
Share of property tax in own revenues of municipalities is depicted below (Table 4) and
(Figure1).

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 Table 4.
Share [%] of property tax in own revenues of municipalities
URBAN URBAN-RURAL RURAL
YEAR TOTAL
MUNICIPALITIES MUNICIPALITIES MUNICIPALITIES
2000 24,18% 19,40% 29,94% 26,72%
2001 29,38% 23,13% 35,32% 34,01%
2002 37,90% 35,34% 39,12% 38,93%
2003 37,41% 35,71% 39,12% 37,29%
2004 34,71% 32,47% 36,14% 35,32%
2005 34,03% 31,75% 35,77% 34,40%
2006 32,05% 29,75% 33,74% 32,50%
2007 28,62% 26,35% 30,22% 29,13%
2008 26,12% 24,43% 27,43% 26,36%
2009 28,27% 26,63% 29,88% 28,13%
2010 28,08% 26,96% 29,51% 27,65%
2011 28,33% 27,87% 29,65% 27,43%
Source: Own study based on data from the Central Statistical Office of Poland

Figure1.
Share [%] of property tax in own revenues of municipalities
45,00%

40,00%

35,00%

30,00%

25,00%

20,00%

15,00%

10,00%

5,00%

0,00% TOTAL URBAN MUNICIPALITIES

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
URBAN-RURAL MUNICIPALITIES RURAL MUNICIPALITIES

Source: Own study based on data from the Central Statistical Office of Poland

Share of property tax in the discussed period showed a falling tendency in all types of
municipalities. In comparison with 2003, the share decreased for all municipalities by 9,08
percentage points, and the smallest fall (by 7,84 percentage points) was noted in urban
municipalities. It is noticeable though that in absolute numbers urban municipalities noted an
increase of property-related incomes by 3 433 091 900 PLN, in urban-rural municipalities
1 419 469 800 PLN and in rural municipalities – 1 277 306 500 PLN.
Share of agricultural tax in own revenues of municipalities is presented in Table 5 and
Figure 2.

105
 Table 5.
Share [%] of agricultural tax in own revenues of municipalities
URBAN URBAN-RURAL RURAL
YEAR TOTAL
MUNICIPALITIES MUNICIPALITIES MUNICIPALITIES
2000 4,05% 0,15% 4,85% 10,05%
2001 4,16% 0,15% 5,02% 10,07%
2002 5,20% 0,25% 5,01% 9,68%
2003 5,36% 0,35% 5,13% 10,01%
2004 4,84% 0,31% 4,65% 9,12%
2005 4,62% 0,27% 4,45% 8,80%
2006 3,51% 0,20% 3,31% 6,77%
2007 3,45% 0,20% 3,31% 6,57%
2008 3,92% 0,26% 3,77% 7,37%
2009 4,05% 0,26% 3,92% 7,50%
2010 3,02% 0,17% 2,90% 5,55%
2011 3,03% 0,17% 2,92% 5,49%
Source: Own study based on data from the Central Statistical Office of Poland

Figure 2.
Share [%] of agricultural tax in own revenues of municipalities
12,00%

10,00%

8,00%

6,00%

4,00%

2,00%

0,00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

TOTAL URBAN MUNICIPALITIES

URBAN-RURAL MUNICIPALITIES RURAL MUNICIPALITIES

Source: Own study based on data from the Central Statistical Office of Poland

One can observe a similar (falling) trend as in case of property tax. Incomes from this
source play less significant role in generating own revenues than property tax. Furthermore, there
is great differentiation with regard to contribution of the tax to own revenues in different
municipality types. In rural municipalities the income share of this tax is 30 times higher than in
urban municipalities.
Among the discussed taxes, forest tax plays the least significant role. The share of forest tax in
own revenues of municipalities in the period 2003-2011 did not change and remained at the level
approx. 0,6%. It turns out that the share is relatively stable in various types of municipalities.

106
 Table 6.
Share [%] of forest tax in own revenues of municipalities
URBAN URBAN-RURAL RURAL
YEAR TOTAL
MUNICIPALITIES MUNICIPALITIES MUNICIPALITIES
2008 0,56% 0,03% 0,57% 1,05%

2009 0,60% 0,03% 0,60% 1,11%

2010 0,51% 0,02% 0,51% 0,91%

2011 0,54% 0,03% 0,54% 0,96%

Source: Own study based on data from the Central Statistical Office of Poland

Chart3.
Share [%] of forest tax in own revenues of municipalities
1,20%

1,00%

0,80%

0,60%

0,40%

0,20%

0,00%
TOTAL URBAN MUNICIPALITIES
2008 2009 2010 2011
URBAN-RURAL MUNICIPALITIES RURAL MUNICIPALITIES

Source: Own study based on data from the Central Statistical Office of Poland

In the structure of municipal own revenues, incomes from assets have significant meaning.
They comprise revenues from:
 property sale,
 conversion of perpetual usufruct right into freehold right,
 incomes from rental, leasehold and other contracts.
The share of these revenues in own revenues of municipalities in the period 2007-2008 is
presented in Table 7 and Figure 4.

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 Table 7.
Share [%] of incomes from assets in own revenues of municipalities
INCOMES
URBAN URBAN-RURAL RURAL
FROM TOTAL
MUNICIPALITIES MUNICIPALITIES MUNICIPALITIES
ASSETS
2007 10,29% 13,25% 9,62% 8,23%

2008 9,02% 12,10% 9,06% 6,21%

2009 8,00% 10,93% 7,96% 5,46%

2010 8,15% 11,69% 8,05% 5,23%

2011 7,55% 10,76% 7,57% 4,88%

Source: Own study based on data from the Central Statistical Office of Poland

Figure4.
Share [%] of incomes from assets in own revenues of municipalities
14,00%

12,00%

10,00%

8,00%

6,00%

4,00%

2,00%

0,00%
2007 2008 2009 2010 2011

TOTAL URBAN MUNICIPALITIES

URBAN-RURAL MUNICIPALITIES RURAL MUNICIPALITIES

Source: Own study based on data from the Central Statistical Office of Poland

The share of revenues discussed above in generating own incomes is declining for all
municipality types. The most significant fall was noted in rural municipalities (by 3,35 percentage
points), while in other municipalities the share fell by 2,49 percentage points (urban
municipalities) and 2,05 percentage points (urban-rural municipalities).
In the study the author also analyses the share of rental and leasehold incomes. From the data
presented in Table 8 and Figure 5, one can see that the share of incomes from these revenue
sources is increasing.

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 Table 8.
Share [%] of incomes from rental, leasehold and similar contracts in own revenues of
municipalities
URBAN URBAN-RURAL RURAL
YEAR TOTAL
MUNICIPALITIES MUNICIPALITIES MUNICIPALITIES
2007 2,97% 4,64% 2,53% 1,87%

2008 2,89% 4,62% 2,51% 1,70%

2009 3,18% 5,07% 2,85% 1,85%

2010 3,13% 5,05% 2,84% 1,78%

2011 3,20% 5,17% 2,87% 1,88%

Source: Own study based on data from the Central Statistical Office of Poland

Figure 5.
Share [%] of incomes rental, leasehold and similar contracts in own revenues of municipalities
6,00%

5,00%

4,00%

3,00%

2,00%

1,00%

0,00%
2007 2008 2009 2010 2011

TOTAL URBAN MUNICIPALITIES URBAN-RURAL MUNICIPALITIES RURAL MUNICIPALITIES

Source: Own study based on data from the Central Statistical Office of Poland

Total revenues from the described sources are shown in Table 8 and Chart 6.

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 Table 9.
Share [%] of revenues from assets, agricultural and property taxes in own revenues of
municipalities
URBAN URBAN-RURAL RURAL
YEAR TOTAL
MUNICIPALITIES MUNICIPALITIES MUNICIPALITIES
2000 43,88% 38,87% 47,58% 48,89%

2001 43,07% 33,99% 49,81% 51,71%

2002 52,18% 48,14% 52,28% 55,56%

2003 52,06% 48,78% 52,62% 54,41%

2004 48,36% 44,33% 49,00% 51,39%

2005 46,54% 43,41% 47,17% 48,79%

2006 44,57% 41,87% 45,41% 46,24%

2007 42,36% 39,81% 43,15% 43,94%

2008 39,06% 36,78% 40,26% 39,94%

2009 40,32% 37,82% 41,77% 41,09%

2010 39,25% 38,82% 40,46% 38,43%

2011 38,91% 38,80% 40,14% 37,79%

Source: Own study based on data from the Central Statistical Office of Poland

Figure 6.
Share [%] of revenues from assets, agricultural and property taxes in own revenues of
municipalities
60,00%

50,00%

40,00%

30,00%

20,00%

10,00%

0,00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

TOTAL URBAN MUNICIPALITIES

URBAN-RURAL MUNICIPALITIES RURAL MUNICIPALITIES
Source: Own study based on data from the Central Statistical Office of Poland

In comparison with 2003, the share of incomes from the taxes discussed above (i.e. property
tax, agricultural tax, forest tax) as well as the share of income from assets in own revenues show
falling tendency. Depending on the municipality type, the share oscillates from 37,79% (rural
municipalities) to 40,14% (urban-rural municipalities).

110
 On the basis of information presented above, one can conclude that property-related revenues
(taxes, incomes from assets) are an important source of own revenues for municipalities in Poland,
while incomes from assets are less significant.

5. Conclusions
A thorough analysis of property-related incomes leads to some conclusions concerning
property management. The most important are:
 revenues from the sources discussed above are differentiated in particular years.
It is partially due to changes of legal regulations, especially in perpetual usufruct
(possibility to convert the right into freehold right), and rules of selling dwellings
to tenants,
 decreasing percentage share of incomes from properties is accompanied by an
increase in absolute numbers. The changes introduced on 1 st January 2004 by the
Act on local governments’ revenues as of 13th November 2003 (Dziennik Ustaw of
2003, no. 203, item 1966) concerned increasing municipalities’ share in personal
and corporate income tax, yet the result is a decrease of the share. The next thing
affecting the level of property-based incomes in municipal revenues are changes
of revenues from property sale. Municipalities are reluctant to sell their assets;
they prefer long-term incomes generated by the municipal stock. Such an
approach in the field of property management expresses municipalities’ priority of
long-term development goals over short-term ones (one-time inflows to the
budget),
 changes in incomes from properties in the discussed period are often the result of
intentional decisions taken in the field of property management. Municipalities
are active participants of the property market. Sale of municipal properties leads
to diminishing the stock, which in turn limits the base for generating incomes in
the future. Therefore, municipalities are currently taking up activities aimed at
changing management techniques within the municipal stock or applying criteria
of economic effectiveness while deciding upon forms/methods of municipal
property stock management11.
To sum up, the level of property-related revenues and their significance with regard to
generating own revenues are the result of ongoing changes both within the municipal stock itself
and management strategies applied to the subject stock. Partially, they are also due to changes of
legal regulations.

11 See e.g. Andersson R., Söderberg B., (2011),"Internal rents and the ownership of state properties: experiences from
Sweden", Journal of Corporate Real Estate, Vol. 13 Iss: 1 pp. 64 – 76; Jolicoeur P.W., Barrett J.T., (2004),"Coming of age:
Strategic asset management in the municipal sector", Journal of Facilities Management, Vol. 3 Iss: 1 pp. 41 – 52

111
112
 5. ‘SECOND LEAGUE’ – THE WORLD’S SMALLER
DEMOGRAPHIC POTENTIALS WITH POPULATION COUNT
RANGING FROM THAT OF POLAND TO 100 MILLION

Abstract
An analysis concerning demographic potentials and changes in growth dynamics must be
limited to the period of ‘statistical civilisation' and, to be more specific, to the period for which
relatively reliable population statistics are available. For the countries examined herein, located
across different continents, that period ranges from the second half of the 20th century until the
most recent years. It is the only period for which statistical data concerning Polish population for
such analysis can be obtained.
The second basic assumption will be inclusion of demographic potentials of different countries
with a greater population than that of Poland. At the baseline we shall find out which countries are
currently ahead of Poland in population ranking, based on the United Nations population statistics,
as well as comparative data compiled most recently by Poland's Central Statistical Office (GUS) for
year 2010.

Keywords: population, demographic potential, demographic growth.

1. Introduction
An analysis concerning demographic potentials and changes in growth dynamics must be
limited to the period of ‘statistical civilisation' and, to be more specific, to the period for which
relatively reliable population statistics are available. For the countries examined herein, located
across different continents, that period ranges from the second half of the 20th century until the
most recent years. It is the only period for which statistical data concerning Polish population for
such analysis can be obtained.
The second basic assumption will be inclusion of demographic potentials of different countries with
a greater population than that of Poland. At the baseline we shall find out which countries are
currently ahead of Poland in population ranking, based on the United Nations population statistics
(Population and Vital Statistics Report (2013), United Nations, New York), as well as comparative
data compiled most recently by Poland's Central Statistical Office (GUS) for year 2010.
In his subsequent publications, the author of this study quite consistently analyses population
changes that take place on global and local scale. Therefore, we may recall that one of his previous
studies was examining the largest demographic potentials (Rączaszek, 2012, Croatia). In view of
that research and other publications, in 2012 there were 12 countries in the world with population
in excess of 100 million. This analysis, resorting to a sport metaphor, concerns what may be
referred to as a 'Second League'. The largest demographic potentials are well known and they have
been subjects of many analyses (Rączaszek, 2012, Opole). Poland is considered to have a significant
population, although not the largest, especially in European comparisons (Compare: Rosset, 1962).
According to the source specified above, there are 22 other countries worldwide ahead of Poland.
So in this ranking Poland currently takes position number 34. This study shows population changes
in the analysed group of countries since the middle of the 20th century and the dynamics of those
changes in the analysed period.

2. Demographic situation in selected countries before the middle of the century

A starting point adopted for this analysis is the situation at the beginning of the 60's, as from
then on both Polish statistical yearbooks and foreign literature (Mueller, Nauck, Diekmann, 2000)
include fairly complete demographic data. It was virtually a post-colonial period, but also a period,
in which the population number was affected by the 'demographic explosion' that took place in the
middle of the 20th century (Compare: Rosset, 1978). This situation, however, was recorded 50
years ago and it would be an interesting experience to examine demographic changes in various
countries on different continents taking place over a half century.
At the specified time, half a century ago, most countries with a population greater than that of
Poland were situated in Europe.
The first chart shows the situation within Europe.

113
 Table 1
European countries with a population larger than Poland.
No. country year population
1 2 3 4
2 FRG/GDR (Germany)* 1962 71868
3 Great Britain 1962 53301
4 Italy 1962 50003
5 France 1962 46998
6 Ukraine 1963 44054
7 Spain 1962 30817
8 Poland 1963 30691
Source: 1963 statistical yearbook, GUS, Warsaw 1963.
*In 1962 there were two separate German states. The chart includes a combined figure for both of
them.

This first table already shows a situation different to the current one. Thus the political changes
during the period of analysis need to be mentioned. In 1962 there were two separate German states
in Europe, then called Federal Republic of Germany and German Democtratic Republic. For the
purpose of this analysis we have selected to include only those countries whose population is
currently greater than that of Poland, therefore we shall examine the whole of Germany within its
current borders. As a result, the figure presented in the chart represents the combined population
of both states existing in 1962, which back than amounted to nearly 72 million.
It is also worth noting, that the above list includes the data for Ukraine. In 1963 the independent
state of Ukraine did not exist. Polish statistical yearbooks did, however, publish data for the
republics united within the former Union of Soviet Socialist Republics, which was supposed to
suggest the seemingly voluntary character of being a part of the USSR. The political reality was
different, however, the result is that the data concerning the population of Ukraine during that
period is available and that figure exceeded 44 million.
Another thing to be noted is the population of Spain, which at that time exceeded that of Poland
by slightly over 100,000. Such a close run between Poland and Spain has lasted since the end of the
Second World War. Prof. Edward Rosset, who at that time used to deal with analysis of
demographic data, judging by the dynamic population growth in Poland was forecasting that
Poland would soon overtake Spain in the demographic race12 (Rosset, 1962, p.147). This has still
not happened, however, as growth tendencies in both countries underwent significant change in
the 60's.

12 Edward Rosset predicted that Poland was going to overtake Spain with regard to population count in the
analysed year of 1962.

114
 Table 2
Selected Asian countries in the early 60's.
No. country Year population
1 2 3 4
2 Iran 1962 21227
3 Burma (Myanmar) 1962 22342
4 South Korea 1962 26106
5 Siam (Thailand) 1962 28000
6 Turkey 1962 29059
7 Vietnam 1961/1962 30519
8 Philippines 1962 29698
Source: 1963 statistical yearbook, GUS, Warsaw 1963.

The second data set includes countries situated in Asia, where the number of states with a
population greater than Poland was the highest. Here also political changes need to be mentioned.
In the early 60's (until 1967) there were two countries existing in the territory of divided Vietnam.
As in the case of Germany, the table includes a combined total of the population. The table also lists
Philippines – in 1962, with a population smaller than that of Poland. In this case it is worth
highlighting the dynamics of demographic changes, as since 2012, according to some statistics,
Philippines have been inhabited by over 100 million people, and they have been included in other
publications (Rączaszek, 2012, Croatia). It is the only country that from the baseline population of
30 million – 50 years ago, has managed to reach a three-digit value13, which means a growth of over
200%! It is also worth noting that two of the countries listed above have been listed under their
former names. In 1949 Siam was renamed as Thailand. In Polish statistical yearbooks the old name
continued to be used for some time after that date. With regard to Burma, it still is not clear which
name should be used.
All the above countries had populations of 21-30 million and in 1962 their population counts
were lower than Poland's.

Table 3
African countries with a population larger than Poland.
No. country year population
1 2 3 4
2 UAR (Egypt) 1961 26593
3 Ethiopia (Abyssinia) 1962 21000
Republic of South
4 1961 16236
Africa
5 Kenya 1962 8676
6 Tanzania 1962 9560
7 DR Congo (Zaire) 1962 14797
8 Sudan 1962 12470
Source: 1963 statistical yearbook, GUS, Warsaw 1963.

Africa is another continent that includes a number of countries with a population greater than
Poland. The above chart includes seven such countries, with the population counts varying greatly
in the early 60's and ranging from 8.7 to 26.6 million. Interestingly, the countries currently larger
than Poland (population-wise) include Kenya and Tanzania, despite each of them having less than
10 million inhabitants in 1962. That means that the population growth dynamics in those countries
over the period of half a century has reached around 300%.
Similarly to earlier lists, we notice double naming. Until 1971 Egypt was officially known as
United Arab Republic, whereas Ethiopia used to be referred to as Abyssinia. The chart also includes
the Democratic Republic of the Congo with a population of less than 15 million, which in the years
1971-1997 was officially known as Zaire.

13 See table 9 below.

115
 Table 4
Selected countries of South America.
No. country year population
1 2 3 4
2 Argentina 1962 21416
3 Colombia 1962 14769
Source: 1963 statistical yearbook, GUS, Warsaw 1963.

South America is the last continent which houses some countries more populated than Poland.
In 1962 Colombia had a population of less than 50% of that of Poland, whereas the population of
Argentina exceeded 21 million.
At the beginning of the 60's there were a total of 17 countries worldwide with population greater
than Poland14. Thus, with regard to demographic potential, Poland took the 18th position on the list
of the largest countries by population.

3. Population in selected countries quarter of century ago

The four tables above present the baseline state of 50 years ago. After that moment all the above
countries underwent certain demographic changes, the dynamics of which varied. These dynamics
will not be discussed here in detail year after year. Instead, the next set of tables shows the
analysed population figures from the end of the 80's, so approximately 25 years later, whereas the
final set will present the most current data. That allows for representing the dynamics of
quantitative demographic changes in the selected countries, after the reproductive period of two
subsequent generations. As numerous analyses show (See: Rączaszek, Wieczorek, 2004), the
generational renewal in Poland follows the pattern of the sub-replacement reproduction rate. For
comparison we shall also present some countries that still record a reproduction rate above
replacement level.

Table 5
Population of selected European countries at the end of the 80's.
No. country year population
1 2 3 4
2 FRG/GDR 1986/1987 75820
3 Great Britain 1987 56920
4 Italy 1987 57330
5 France 1987 55630
6 Ukraine 1987 51201
7 Spain 1987 38830
8 Poland 1987 37664
Source: 1988 statistical yearbook, GUS, Warsaw 1963.

Until the end of the 80's the populations of large European countries show a growth tendency.
Relatively, the highest population growth is registered in Poland and Spain, although the population
difference between these two countries increased. The above table, as well as the previous ones,
include a combined figure for two German states. One shall note that in Polish statistical yearbooks,
the name used to refer to West Germany has changed. Instead of the German Federal Republic the
state is referred to as the Federal Republic of Germany.

14 We assume that this applies to 11 countries with current populations of over 100 million and at that time
were also larger than Poland, as well as to six European countries, based on the data presented in the above
tables. Those world's 11 greatest demographic potentials include also Bangladesh, even though that country
had not separated from Pakistan until 1972. Considering the political situation at that time (1962), Poland was
in the 17th place with regard to population count.

116
 Table 6
Selected Asian countries in the 80's.
No. country year population
1 2 3 4
2 Iran 1986 49760
3 Burma (Myanmar) 1986 39410
4 South Korea 1987 42030
5 Thailand 1987 53600
6 Turkey 1987 51350
7 Vietnam 1986 61109
8 Philippines 1987 56980
Source: 1988 statistical yearbook, GUS, Warsaw 1963.

Compared to the situation from a quarter of a century earlier, the populations of selected Asian
countries had doubled and now ranged from 39 to 61 million. Such dynamics of change meant that
all of these countries now had a greater population than Poland, whereas 25 years earlier Poland
had more inhabitants than any of the listed countries. During that period the demographic
potentials and economic growth in Asia accelerated quickly.

Table 7
Population of selected African countries in the 80's.
No. country year population
1 2 3 4
2 Egypt 1987 50740
3 Ethiopia 1987 46180
Republic of South
4 1986 33220
Africa
5 Kenya 1987 22940
6 Tanzania 1987 23220
7 Zaire 1986 30850
8 Sudan 1986 22180
Source: 1988 statistical yearbook, GUS, Warsaw 1963.

A similar tendency to growth can also be observed in the selected African countries. Their
population ranged from 22 to 51 million. Basically, population in those countries increased twofold.
In the first two cases that meant that their population exceeded that of Poland at that time.

Table 8
Selected Asian countries in the 80's.
No. country year population
1 2 3 4
2 Argentina 1987 31500
3 Colombia 1987 29730
Source: 1988 statistical yearbook, GUS, Warsaw 1963.

A significant increase in population was also recorded in South American countries. The
population of Colombia increased by 100% compared to that of the early 60's. The growth in
Argentina was 50% lower than that. Both of these countries at that time had fewer inhabitants than
Poland.
To summarize the situation of the late 80's, one can conclude that Poland's demographic
potential, despite its constant rise, showed slower dynamics of population growth compared to Asia
or some African countries and in the ranking of world's greatest demographic potentials Poland
lost its position number 18 and fell down to the 26th place.

117
4. Current demographical situation in selected countries
The rates of demographic changes in countries situated on different continents are significantly
varied. The changes are most dynamic in the developing countries of Africa, followed by those of
Asia (Fleszar, 1978).
Population growth rates observed over half a century reach over 370% in the case of Kenya.
Ukraine is at the opposite end, as since 1962 it recorded an increase of a mere 4%. It has to be
pointed out, however, that until 1987 Ukraine's population increased to over 51 million. In fact, the
population of Ukraine has been decreasing over the last two decades. It is the only such case among
the analysed countries. Still it is quite possible that, in the face of low fertility rates in European
countries, such negative actual growth will soon be observed in other countries, such as Poland or
Germany.
The situation is very dynamic and there are some data sets which provide different figures.
There are various reasons for that. On the Internet there is a chart which lists the world's countries
according to population. It has been compiled based on the CIA World Factbook 15
(http://pl.wikipedia.org/wiki/lista_państw_świata_według_liczby_ludności. 24/06/2013, 9pm).
According to that source the Philippines now have over 103 million citizens, which mean that this
country should not be examined here, among these with population ranging between that of Poland
and 100 million. It is, however, included in this study, as according to Polish population statistics
the population of Philippines still has not exceeded 100 million.

Table 9
Population of selected countries at present.
in %
no. country
1962 2010 2010/1962 ranking
1 2 3 4 5 6
2 Germany 54766 81644 149 15
3 France 46998 62962 134 21
4 Great Britain 53301 62227 117 22
5 Italy 50003 60487 121 23
6 Ukraine 44054 45858 104 28
7 Spain 30817 46506 151 27
8 Poland 30691 38187 124 34
9 Philippines 29698 93617 315 12
10 Vietnam 30519 87117 285 13
11 Iran 21227 73887 348 17
12 Turkey 29059 73085 251 18
13 Thailand 28000 67090 240 20
14 Myanmar 22342 53414 239 24
15 South Korea 26106 49169 188 26
16 Egypt 26593 84474 318 14
17 Ethiopia 21000 79456 378 16
18 D R Congo 14797 67827 458 19
Republic of
19 16236 49991 308 25
South Africa
20 Tanzania 9560 41893 438 31
21 Kenya 8676 40863 471 32
22 Sudan 12470 43940 352 30
23 Colombia 14769 44295 300 29
24 Argentina 21416 40666 189 33
Source: Poland's 2011 statistical yearbook, GUS, Warsaw.

15 http://pl.wikipedia.org/wiki/lista_państw_świata_według_liczby_ludności. 24/06/2013, 9pm.

118
 The reasons for these changes can also be political. In 2011, as a result of political agreements, a
new country was formed. On the 9th of July 2011, South Sudan proclaimed independence.
According to the Polish statistical yearbook for 2012 that country has a population of over 9
million. In this situation Sudan, as listed in the above tables, currently has less than 37 million
inhabitants, and in the ranking of the world's largest demographic potentials it is placed below
Poland, which – once we account for that political fact – takes the 33rd position in the ranking.

5. Conclusions
The group examined in this study comprises countries which are rarely described in
demographic analyses. Such analyses mainly focus on the largest potentials with population of over
100 million, of which there had been just 10 for a long period. This long established lead has been
now joined by Mexico, when at the beginning of the 21st century its population soared above 100
million.
The countries presented above follow closely behind the top group (they are a demographic
Second League). Their demographic growth dynamics is so fast that populations of countries such
as Vietnam, Iran or Turkey may soon exceed 100 million.
This served as a backdrop for presenting the demographic potential of Poland, which 50 years
ago was number 18 (17) in the world. Immediately prior to the political transformation, Poland was
in position 26 in the ranking and has now dropped to place 33 (34).It is another argument
supporting demographic research which shows how demographic growth dynamics differs
between continents. It also poses a challenge to population and family policy followed by the
countries of wealthy white north (See: Poursin, 1976), where already or soon we will notice
decreasing populations (Kaufmann, 2005). Here we can also add that that the decrease will affect
native populations, as Germany or Great Britain owe their actual population growth not to natural
growth but to immigration. This results in greater cultural diversity of European countries, but also
in problems with immigrants’ assimilation and, in some cases, in jeopardizing the social order in
these countries.

119
120
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NOTES OF THE AUTHORS
Tomasz Adamczyk,Ph. D.
AGH University of Science and Technology
Faculty of Mining Surveying and Environmental Engineering
Krakow, Poland
e-mail: tomasz.adamczyk@agh.edu.pl

Jerzy Adamiczka MSc Arch

AiM Property Małeccy Adamiczka Sp.j.
e-mail: jerzy.adamiczka@aimproperty.pl

Agnieszka Bieda,Ph. D.
AGH University of Science and Technology
Faculty of Mining Surveying and Environmental Engineering
Krakow, Poland
e-mail: agnieszka.bieda@agh.edu.pl

Tomasz Budzyński, Ph. D.

Faculty of Geodesy and Cartography
Warsaw University of Technology
Warszawa, Poland
e-mail: t.budzynski@gik.pw.edu.pl

JanuszDąbrowski, dr. eng.

Faculty of Mining Surveying
and Environmental Engineering
AGH University of Science and Technology
Cracow, Poland
e-mail: djanusz@agh.edu.pl

Elżbieta Jasińska, PhD

AGH University of Science and Technology
Faculty of Mining Surveying and Environmental Engineering University
Kraków/Poland
e-mail: elzbieta.jasinska@agh.edu.pl

Ewa Kucharska- Stasiak, Prof. Ph.D.

Faculty of Economy and Sociology/ Department of Investment and Real Estate
University of Lodz
Lodz, Poland
e-mail: ewkuchar@uni.lodz.pl

PiotrParzych,Ph. D., AssociateProfessor

AGH University of Science and Technology
Faculty of Mining Surveying and Environmental Engineering
Kraków, Poland
e-mail: parzych@agh.edu.pl

AndrzejRączaszek, Ph. D.
Faculty of Economics
University of Economics in Katowice
Katowice, Poland
e-mail: aracza@ue.katowice.pl

127
 Natalia Sajnóg, M.Sc.
Faculty of Geodesy and Cartography
Department of Cadastre and Land Management
Warsaw University of Technology
00-661 Warszawa, Plac Politechniki 1, Poland
e-mail: nsajnog@gik.pw.edu.pl

Maria Trojanek, Prof.

Department of Investment and Real Estate
Poznan University of Economics
Poznan, Poland
e-mail: m.trojanek@ue.poznan.pl

Sabina Źróbek, Prof. dr eng.

Faculty of Department of Land Management and Regional Development
University of Warmia and Mazury in Olsztyn
Olsztyn, Poland
e-mail: zrobek@uwm.edu.pl

Sławomir Żurek, M.Sc.

City Office of Olsztyn
Department of Geodesy and Land Management
Olsztyn, Poland
e-mail: slawomir.zurek@hotmail.com

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