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’.
Taxation 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.
Nigel, thank you for your article published Monday 28th July 2014 and your others on IPT. As I live in Ireland and am an infrequent visitor to my holiday apartment in Paphos, I find your articles very timely and informative.
I have the deeds of the apartment and when I follow the your instructions to search the database to the Parcel level, I can see the 2013 valuations of all 53 Registrations (shops, houses and apartments) in the Parcel. All the valuations are grossly inflated. The market value of my one bed apartment is around €40,000 but the value shown is €114,000. I can identify the other properties and all are valued at about 3 times the open market value.
I have a number of questions to which I would welcome your views
• Is it common for the 2013 valuations to be so exaggerated ? Our apartment is one of 120 units in a late 1980s Leptos development in Kato Paphos – there is nothing special about it and valuations should be relatively easy. BTW, recent sales of similar have been for about €45k and the 1980 value was €13,800.
• Is it normal that a Parcel on which these properties were developed and sold around 1990 would still show 53 Registrations against one Parcel in the database ?
• The Town Planning information on the database shows the overall Parcel having 3 stories with 140% density and 50% coverage and 2 stories with 80% density and coverage not available. Could it be that they valued each property as a 3 or 2 story development even though each apartment and shop is single story and houses are 2 story.
A cynic might say, they overvalued and pushed the value over €100k so that they can collect another €75 as an appeal fee.
@Paul on 2014/08/27 at 7:38 pm – Many are concerned that properties have been overvalued by the Land Registry to ensure the government achieves its revenue targets and contrary to some who comment here, it’s not only expats who are affected. A Cypriot friend of mine is a qualified valuer whose land was recently valued by a bank at €1 million found that the Land Registry had valued it at €1.7 million – he plans to object to their valuation. (There have been a number of cases of ‘strange’ valuations in the Greek language media).
Yes – it is normal for a single parcel to have multiple properties registered on it. Apartments and other complexes with shared facilities are recorded like this. (I guess you found the individual properties listed when you displayed the 2013 values?).
I doubt that the Land Registry has valued the properties as being 2 stories.
As you may have read in an earlier article there have been demands for the Land Registry to explain the methodology it used when assessing property values.
The LR have just published online their shiny new, updated valuations for all properties, and since most of these new valuations, especially for properties purchased in the last 10 years, are way below what we originally paid for them, why do the LR insist on using the much higher purchase prices instead of using their very own shiny new, updated property valuations for calculation of Title Deed Transfer taxes?
Perhaps they can come clean and be a little more transparent in this area too and let us know why this is?
Or is the use of the new valuations for Deed TT reserved for some and not for others as many suspect?
@Costas Apacket on 2014/08/22 at 1:21 pm – As I explained in the article the Land Registry is required by law to assess Property Transfer Fees based on the market value of a property at its date of purchase.
The ‘shiny new, updated valuations’ are only for property taxation purposes.
If you had purchased the property in 2000, but didn’t get the deeds until 2007, I’m confident you would have been happier to pay Property Transfer Fees based on its market value when you bought it rather than its 2007 market value.
@Nigel 22, 2014 11.08am
I paid the PTT on the original buying price of €335,000 (CY£195,000) in October 2013. A sum of €13,275 was paid.
For IPT purposes, the Land Registry has assessed the villa to have a 1980 value of €45,000. This is on the Title Deeds.
I suppose the real question is do I have grounds to appeal against the 1980 value on the Title Deeds seeing as the government says it is valued at €261,000?
@Curmudgen on 2014/08/22 at 12:32 pm – Perhaps I didn’t make it clear enough in the article, but he point I was trying to make in the article was that the ‘taxation value’ is only used for taxation purposes, which is different from a property’s ‘market value’.
A 1980 value of €45,000 is not unreasonable (my 220sqm 3-bed bungalow has a 1980 value of €60,000 – it’s 2013 taxation value is more than €400,000).
Spot on people ….. Lets just make it up and see what we can get away with…….. they just dont have a system that much is obvious.
I just wish the Troika would get busy on this and insist on the calculations to be used.
Quote ‘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’.
Mmmmm, don’t know where that came from.
Having bought off plan for €335,000 in 2006, moved in in 2009, I have literally have stripped out all the crap Chinese fixtures throughout and replaced with quality European items. Along with other internal upgrades circa €34,000 has been spent.
The villa has been assessed at €75,000 less than we paid. Add that to the cost of the internal revamp of €34,000, landscaping at €4,000 and we have an eye watering discrepancy.
The 1980 value has been assessed at €45,000 in October 2013 (Title Deeds). I wonder what the assessment would be if it were based on the LR valuation of €261,000 and not the 2006 contracted price.
Nigel, perhaps you could enlighten me.
@Curmudgen on 2014/08/22 at 10:19 am – are you saying that the Property Transfer Fees you paid were based on a market value of €260,000 (€75,000 less than the €335,000 you actually paid)?
I think Peter Davis @ 0823 has hit it on the button. There is no methodology although one will be formulated very soon that fits and explains a sort of methodology. At least to a degree with enough appendices, ifs and buts to enable politicians and senior public servants to wriggle out of any awkward questions with half believable if not logical argument. To have a simple, transparent, accountable and understandable system would negate the need for armies of civil servants handling the same file dozens of times and each of them signing off their own little area of so called responsibility. The ‘Once and done’ system has yet to be acknowledged by Cyprus but at least we now have computers, tablets of stone are now a rarity – the mindset however will need another millennium or two to eradicate. But we are getting there – be positive folks!
Reality is; there is no methodology.
It’s based on foreigners paying more, and then seeing how far they can pushed before there is an appeal.
The six bedroom house, 100 yards from mine (GC owned) is shown as half the value (€150,000) of my 3 bed villa.
And the price for my villa would be fair if it was in Nicosia or Paphos, but at €303,900 for a villa in a small village of Polis, it’s way off course. It should be possible to make the Government buy it at that price.