THERE has been much criticism over the revaluation exercise conducted by the Land Registry that brought the 1980 values to present day (2013) values and the secrecy behind the methodologies it employs to calculate ‘taxation values’ and ‘market values’.
It is important to note that the 2013 values are solely used for taxation purposes and were assessed based on a property’s location and zoning as well as other building and plot-related characteristics as required in the Memorandum of Understanding (MoU) agreed between the Cyprus government and the troika of international lenders.
Land Registry staff did not enter any premises (with some exceptions) and the valuations were assessed by external inspection. If two properties had an identical external appearance, the same outlook, etc. they would be assigned the same value for taxation purposes.
Numerous anomalies in the revaluations have been reported in the Greek language media and the chairman of the Cyprus Technical Chamber (ETEK) has demanded the Land Registry publish the criteria they have used to determine immovable property values for taxation purposes.
Real market values
It is perfectly possible for two properties with an identical external appearance to have different market values. When assessing a market value factors such as the age of the property, its internal condition and decorative order, the quality of its fixtures and fittings, whether it is freehold or leasehold, whether it has statutory tenants, its proximity to local schools and amenities, service charges, etc. are also be taken into account. Typically market valuations are assessed by a suitable qualified property valuer or an experienced estate agent with a good knowledge of local market conditions.
Land Registry market values
In addition to a property’s ‘taxation value’, the Land Registries are required (by law) to assess a property’s ‘market value’ at its date of purchase to calculate the Property Transfer Fees payable when its ownership changes hands. (For readers from the UK, this is the Cyprus equivalent of the ‘Stamp Duty Land Tax’ or SDLT).
But unlike property valuers and estate agents, Land Registry staff do not visit and inspect properties to assess their market value, they employ a comparable sales method. This assesses market values based on prices that properties in the same area were sold for at the same time as the property being transferred. This method, which is also known as ‘inferred analysis’, may also include market conditions and sales activity within a particular location or area.
There have been many reported cases where the Land Registries have assessed a property’s market value at considerably more than the purchaser actually paid. In one case the Land Registry valued a property purchased for around €294,000 at €465,000 meaning that the purchaser was asked to pay 126% more in Property Transfer Fees than anticipated.
It has also been noted that Land Registry property valuations are never lower than the actual price paid for a property and that it refuses to disclose the criteria it uses to assess market values.
Suspicion and mistrust
While the Land Registry refuses to reveal the methodologies it employs to value properties it merely reinforces the atmosphere of suspicion and mistrust that pervades the Cyprus property market.