THE prospect of a vicious cycle caused by differing property valuations conducted on the same property is a very real one, property valuers have warned.
Recent reports suggest that commercial banks, aiming at minimising the risk of bad-loan write-offs, employ the practice of undervaluing mortgaged properties in order to pressure mortgagees into offering other properties as additional collateral.
Conversely, the same reports indicated that the Lands and Surveys department tends to overvalue properties so that it can collect higher Property Transfer Fees in the event of sale.
Property valuers have been cited in local press as arguing that such practices can only create legal tangles, benefitting lawyers and property valuers themselves, but certainly not the government.
According to the same sources, the government’s troika-imposed decision to update all property valuations – thus far valued at 1980 prices for land registry purposes – to 2013 prices by the end of June for the purposes of taxation on immovable property is bound to cause a bottleneck of appeals and legal challenges.
That is because the revaluation rules stipulate the publication of any revised valuation and its acceptance as fair by the property owner – who may otherwise appeal it within two months of publication, with a further option of seeking legal adjudication if still not acceptable.
As the level of property tax levied will be calculated on the revalued worth of the property, owners will have an implicit incentive to secure as low a revaluation figure as possible, leading to a likely flurry of appeals and legal challenges.
Yet another practice in the property valuation market that is likely to come up in the near future, causing further distortions, is the fact that when the economy showed no signs of a meltdown, many valuers performed valuations based not on objective appraisal criteria but on the amount owners sought to borrow, the same sources said.
Wide discrepancies commonly observed between bank-commissioned property valuations and land-registry ones – on the same property – are indicative of such distortions.
The charges of questionable business practices were deemed groundless and irrational by the Cyprus property valuers’ association, who said they will be setting the record straight in the coming days.
“Banks don’t perform valuations – rather, they commission private valuers to perform them on their behalf,” association board member Stefanos Fintiklis said, explaining that since private valuers do not have a stake in the net worth of a property, they would have no incentive to undervalue – or overvalue, for that matter – properties.
Meanwhile, sources from the land registry suggest that the department is aware of the risk of mass appeals and plans to neutralise it by ensuring that moderate revaluations are performed.
“It’s what I would do,” Fintiklis said.
“Although historically the land registry has been known to overvalue properties, doing it in this case would make little – if any – sense as one can easily predict a storm of appeals by unhappy property owners that would choke the system,” he added.