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Property valuation bands as a more realistic option for IPT revaluation in Cyprus.

Date: 05/08/14

For many years the valuation of properties in Cyprus for IPT (immovable property tax) purposes was based on 1980’s prices shown on title deeds.

The explanation of these prices to property purchasers was swift and to the point – it was always some nonsense number that made little sense and without any relevance to today’s property value.

Driven by the need to raise immovable property tax revenue and to comply with demands of the Troika the method of calculating IPT had to be revised. As a result last year we saw the increase of rates and revision of thresholds for IPT which helped Cypriot economy raise more tax in order to fulfill the terms of the March 2013 bailout. While last year’s tax was calculated using the old 1980’s prices the Troika of international lenders also asked that these property valuations where brought up-to-date. Indeed the market has changed much since 1980 and valuations for tax purposes had to be more accurately reflecting “market” prices.

Currently 2014 tax rates are still to be based on the old 1980’s prices. In the meantime, the new 2013 valuations have been prepared and published online. With every property given a recent valuation down to the euro we raise a question, “Why the Cypriot government saw fit to issue definitive prices?” Having looked up a whole range of properties that we have sold recently we find little correlation between the new values listed online and those realized during the last six months. The old phrase “even a stopped clock is right twice a day” comes to mind, as only around 20% of valuations come close to the true market value. On the whole values are low and one wonders as to the motivation of the Cypriot government in publishing such a list.

While the IPT valuation horse has well and truly bolted, we remain baffled as to why property banding was not used. Putting properties into several price bands would have surely been faster and cost far less than giving a precise valuation to each individual property in Cyprus. It is merely common sense to leave the market forces dictate the “exact price” as they inevitably will. 

At Cyprus Resales we value all our listings by personal visit. The process of setting a correct price to a property cannot be done from an office as the procedure involves assessment of numerous aspects of every property. Even then our valuations often come as a shock to vendors, whose expectations are based on prices quoted on the peak of the market some 5 years ago. Our aim as a professional estate agent is to bring prospective purchasers to every suitable property we have on offer. This means valuations and advertised prices must be realistic and fully reflect market forces. 

The question remains – how can someone make an exact valuation down to a euro without actually visiting a property? How reliable can such a valuation be? If an estate agent did such a sloppy job how long would he stay in business?... To us the solution is obvious. Avoiding unnecessary exact valuation by using price bands and only giving approximate valuation was a correct solution and the only possible one from sitting on an office chair.

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