The July issue of Economía3 magazine dedicates its cover to José Vázquez, President and founder of Euroval.

"Innovation Has Allowed Us to Position Ourselves at a Time where Quality and Traceability are Important."

It is the eighth largest appraisal company in Spain, the first in the Mediterranean Arc, in terms of turnover -12.5 million euros- and market share. The reactivation of the real estate sector has given a new impetus to this company located in the town of San Juan de Alicante.

Its president and founder, José Vázquez, is an engineer who has focused on the professionalization of his team and the harmonization of technology and personnel. Convinced that there are no signs of a real estate bubble, he defends transparency and ethics in a new cycle.

Euroval is 28 years old and you are one of the founders. What did you do at the beginning of your professional career?

J.V.S. I am a technical engineer. Before coming to Alicante in 1972, I worked in the field of electronics and automation with a scholarship in Brazil. Then, here until '88, I served as technical director in a transport and services group, which is now the Vectalia group. At the end of that year I left the company and although I had job opportunities outside of Alicante, I wanted to reside here, so I decided to set up a company in the province.

Appraisal was an emerging sector and I liked it, so we started in Alicante in 1990 as a company.

What milestones have marked the history of the company?

J.V.S. First, the vocation to make it state-wide. We went from being a provincial appraiser to a national one. It cost us a lot, because in those times we had to open offices throughout Spain. Computer communications were not what they are today and you had to have a physical and commercial presence. In addition, at that time, the decision-making bodies of the prescribers, mainly financial institutions, were not centralized, they were totally local or regional.

It was a laborious process of eight years (1990-98). The first external office was opened in '92 in Murcia. Then came Valencia and Madrid. Afterwards we continued throughout Spain and created a system of franchised partners (13 or 14 of our own) and the rest we could say were technical offices with exclusive dedication.

At that time, it was a scheme that allowed us to be all over Spain. Another important milestone is when we absorbed a Catalan company based in Barcelona in '99 - IV Tasaciones, which allowed us to consolidate in Catalonia. And finally, I would highlight the qualitative leap we made in 2000, where we differentiated ourselves technologically from the rest of the sector. We introduced an expert appraisal system, a pioneer in Spain, where we applied new algorithms, statistics and linear regression methodology for appraisal.

Until then, how was it being done?

J.V.S. It was very artisanal. The problem we had is that the same property was appraised very differently, depending on who the appraiser was using the same methodology, our new system allowed us that by incorporating objective data of the real estate object, we would reach a similar value.

Since then, what aspects have marked the operation of Euroval?

J.V.S. Our peak in the 2000s was a little before the crisis -2006- where we had a turnover level of more than 15 million euros. When the crisis arrived, it caught us with a very strong structure throughout Spain, with twelve offices. Then we had to reinvent ourselves.

Our system consisted of centralizing ourselves. Now the "factory" would be in San Juan and this made it possible that as we had a good technological support, we could work throughout Spain with a single office, leaving Madrid as a representative and commercial office. We had to make staff adjustments -we had more than 130 people on the payroll and we went down to just over 30 in the valley period, year 2013-.

How is the company structured now?

It remains centralized in San Juan. From here, the entire operational and technical part of Spain and Portugal is controlled. Then we have two support offices -in Madrid and Barcelona- that collaborate both in the commercial field and in the technical part, but in very specific aspects.

The opening of the office in Barcelona took place in September 2017, at a politically turbulent time in Catalonia, what decided you and how is it working?

J.V.S. We opted for Barcelona due to the growing demand for assignments from several Catalan entities that, due to their typology, required supervision and other face-to-face actions.

A year from now, do you consider the decision to be correct?

J.V.S. Correct and convenient to be able to capture and adequately carry out that demand for work.

In 2017, they were the fastest growing appraiser according to the AEV. Where has the growth come from?

J.V.S. It has come from several factors. In the first place, the most important, is that the market has changed and our clients have increased their level of turnover. Regarding the sector, we have grown more because we have been more efficient in some things and it has allowed us to reach new clients.

Could you cite an example?

J.V.S. All the entities have changed the system in recent years. The assignments are centralized and this means that there is greater control over the suppliers. These mechanisms are based on delivery times, quality of the reports and the opinion given of you by the prescribers or offices. In all these factors, we have been very well scored, which has allowed us to increase the quota per entity.

Any report provided by an approved company, according to the regulations of the Bank of Spain is valid; but the entities trust in known companies and have their own criteria and from there they approve and give work. This has been noticed in the last three years, where the sector has been growing below 20% and we have done it above 40%.

In the case of new clients, the situation is similar in that they have valued our service, have trusted us and have been giving us more work.

What is the client profile? And what has changed in this aspect after the crisis?

J.V.S. For us, 80% of the turnover before the crisis came from financial institutions and specifically for assets to be mortgaged.

Right now, financial institutions represent 60% and the rest is made up of professional offices, private clients, developers and servicers -a type of powerful client who are those to whom financial institutions have passed those large real estate portfolios-.

Then we have expanded the portfolio of our services. We are a company that tries to do total valuation, that is, we value from any real estate or real estate project to all types of assets, rights and companies. That is why we have many types of clients, although they are not so large and recurrent in their assignments.

We have launched, through Euroval.com, e-commerce platforms to perform online valuations of many types of assets. Soon we will launch a new online valuation application for companies, mainly for SMEs. We have been running the online valuation of homes since 2006.

When have the new services been incorporated?

J.V.S. We have always opted for online valuation systems, that is why we have had them implemented since 2006, they have been enriched with the improvement of algorithms, databases and the practice that we have been acquiring. Regarding the rest of the web services, every day we try to make them more intuitive so that the client can request it from a mobile phone or through the web.

José Vázquez together with Eduardo Sanchis, General Director of Euroval

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"Tourist Rentals Have Distorted the Price of Rental Housing"

Recently, the president of Provia assured in Economía 3 that there was no real estate bubble. Does your perception agree with this opinion?

J.V.S. Yes, I agree, the symptoms of a bubble are not present at the moment under any concept. This price growth is normal. Real estate cycles usually last about 16 years and we are in a new cycle since 2014, within the graph of the cycle there is a Gaussian bell-type curve that will go up, until the middle of the cycle and then it will go down, hopefully smoothly.

We analyze the micro-markets, it is not the same on one street, the right or left sidewalk. Right now prices are going up, of course, depending on the areas and the demand. During the crisis, the noble areas of the big cities did not fall in price because there was very little supply and great demand.

In some areas and cities there have been drops of up to 40%, but for two years prices have been rising or consolidating, depending on the areas.

For everything to lead to a bubble, many factors have to occur at the same time and it is very difficult for that to happen again, with that ease of credit, that obsession to buy as an investment, because it was believed that housing could not fall. The investor already knows that.

What forecasts are you working with?

J.V.S. We have to talk in the short term, beyond that it does not make sense. We have an econometric model for price review, they are based on past data and prospective socioeconomic data, we come from disparate data, we see a macro growth that can reach up to 5%, although with much disparity depending on the areas. Here various aspects are included: used housing, new housing, etc.

What problem is occurring in the rental market?

J.V.S. It is a problem of supply and demand. The characteristics of the homes also influence, right now homes are being made for singles, every day this percentage rises in society and they think about selling or renting.

How has tourist rentals distorted the housing rental market?

J.V.S. Quite a lot in some areas. Statistically, where we have noticed it the most is in the islands, since they are limited spaces. We have seen that neither officials nor professionals want to go there if they are not provided with housing. The town councils want to attack it with provisions, but these go against the free market. It is evident that a solution is needed. There are certain types of properties that are prepared, the problem is that they have been covered up for a long time. I think the Administration is now more on top of it.

In short, new models. Now we find buildings that are built only for this purpose. Large and numerous investors have appeared, such as the Socimis, which are the companies that have come to replace the old real estate investment funds -which no longer exist-.

Transparency and Traceability

You have created the Real Estate Analysis Institute, a consultancy specialized in real estate studies and analysis within the company and other groups and other tools, what should be the objective of these study departments?

They are objectives of information and support to our technical developments, we carry out studies and analysis of real estate conjuncture.

All agents related to real estate activity seem to have learned something. At a time when it is clear that the client is at the center and that it is necessary to provide companies with values, what have the appraisal companies learned?

In this new stage, the first thing is the responsibility we have in the values we give. For this and in our case, we have equipped ourselves quite well and in the rest the same, because the sector demands it, we all have signed codes of conduct so that the appraiser cannot be pressured by any of the parties. We are focused on giving transparency and traceability to our reports, in addition to the characteristics of the appraised property itself, also those of the properties that are compared as all the calculations that are made and the methodology used.

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What role has innovation and technological commitment played in the company?

J.V.S. It has always played an important role, the only problem is that it has to be perceived. Innovation has allowed us to position ourselves and consolidate ourselves, at a time when the quality and traceability of our work is important. Looking ahead, we start from a more worked, more studied base to go to total innovation that will allow us greater integration with our clients and prescribers.

I think this will make the figure of the appraiser change to an expert notary who supervises all the details, qualities and characteristics of the real estate object to be appraised, introduces those objective data into the system and then it will be the application itself that will shape the report so that the appraiser reviews and confirms it, before passing to a final supervision by a specialized Validation department. This will be done by expert systems integrating into the technical report the management, requirements and specifications requested by the client.

Are you referring to the RACE project that you have just presented?

J.V.S. This project is much more advanced. The acronym RACE means Renovation of Corporate Applications of Euroval. What we have now is an expert appraisal application that we launched in 2000 to which we have been improving and adapting to the new supports and specifications.

Technology has changed in these 18 years and now we work with data in the cloud, we apply new big data and artificial intelligence systems to improve the whole process.

What are the objectives set for 2018?

In this year the most important objective is to consolidate the work of these last three years, because we have grown quite a lot. We have gone from thirty people in 2014 to more than 70 permanent staff. We have more than doubled this section and the network of appraisers has increased by around 35%. We have also started the service in Portugal with an exclusive agreement and we serve all our Spanish clients in the Portuguese country.

Another of the objectives, after going through the analysis stage of RACE, is to include all the staff in the management and characteristics of the new application. For us, quality and integration issues are fundamental, each department has its needs and it is important to incorporate them all. We will be using the new versions in several milestones through our current applications, with the project scheduled to be completed by mid-2020.

You have named Portugal What are the plans at international level? Are you considering expanding?

J.V.S. In this field, what we have are collaborations with various companies from several countries such as Portugal and Romania in Europe or Chile, Argentina and Mexico in Latin America.

For now what we do is share experiences, but above all, we work with clients from those countries. Within Europe, Spain is one of the most advanced countries, because appraisal companies have existed since 1981, with a series of regulatory requirements and barriers to entry, to ensure the quality of their work. In the EU, our competition is natural persons, independent professionals or small offices, so it cannot be compared with the operational structure of an approved appraisal company.

Regarding the national implementation, what areas have more weight for Euroval?

J.V.S. In this sense, where the economy moves, fundamentally construction and mortgage credit. In our country, at the moment they are Madrid, Catalonia, Andalusia and the Valencian Community. Since mid-2014, the progressive increase in assignments has been noticed, in Catalonia we have not yet noticed the procés.

Banks are now opening up mortgage financing, although the control criteria are high, and therefore, the perceived pace is slow. However, rentals are indeed moving.

It is not the first time, but this year, you won the public tender for judicial appraisals of the Generalitat in the Valencian Community. What has this meant for you, and what is the weight of public administrations in your turnover?

In our portfolio, judicial appraisals account for around 3%, which will now increase with this concession to more than 4%. We considered entering the tender due to our experience in other communities; if you meet the technical specifications, the greatest weight of the award falls on the price.

It is a very specific issue that requires a lot of experience and still requires a lot of artisanal work. Its implementation has been delayed because the administration had to address several appeals. We hope to start soon.

The Appraisal Company that Knows how to Squeeze the Data

The commitment to openness and transparency can be observed in this company in an open information model. The president of Euroval, José Vázquez, together with his team, has articulated two information platforms; the first is the Institute of Real Estate Analysis (Instai), and the second is its situation reports, although both go hand in hand. The truth is that the last two publications bearing the Euroval seal have been very accurate about the forecasts, which seem to be fulfilled to a greater or lesser extent. Behind this information, there is an effort to give transparency to the data. At the end of November 2017, the company's Real Estate Situation Report confirmed the resurgence of the usual promoter areas.

The truth is that stability after the storm of the crisis has settled in, giving a strong weight to the sale of second-hand homes and rentals. In 2016, "only one in 10 sales transactions is carried out on new housing." Now the forecast for prices places them at an average of up to 5%, depending on the area.

Internally, Euroval is also aware of the importance of corporate information. It is easy to obtain data. All of this has allowed them to go from a market share of 2.2% to 4.4% in five years. For example, the number of reports has increased from 34,626 reports in 2016 to 60,297 last year, the second-highest figure in the company's history. The value of these reports has been an internal record. The company exceeded 36 billion euros in appraised value in 2017.

https://economia3.com/2018/07/13/151005-euroval-la-octava-sociedad-de-tasacion-de-espana/