The finance ministry finds itself in an impasse regarding plans for an overhaul of the tax valuations of real estate nationwide, as in lower and mid-priced locations the tax valuation must be substantially hiked in order to match real market values, despite the fact that since 2007 the differential between commercial and tax values has been greatly reduced.
This is a key reason that the introduction of new tax valuations will likely be put off until the spring of 2018.
According to Eurobank Property Services, while market values of properties were on average 32 percent higher than the tax valuation per square metre, the spread has been substantially reduced.
“Due to the major decline in the real estate market since 2008, the relationship was reversed between tax valuation and market value, highlighting a need for convergence,” Eurobank Property Services managing director Dimitris Andritsos told the Sunday To Vima.
“The existing method of calculating tax valuations was pioneering when first introduced, but his has not been updated sufficiently, and hence existing tax valuations are unreliable,” he said.
For a comprehensive updating of tax valuations, what is required is a revision of zone prices, a redrawing of geographic zones in many cases, the introductions of new variables to best reflect the characteristics of properties, and an updating of the quotients of adaptation and of commercial value.
Eurobank Property Services created a sample of 400 transactions to track general market trends. Comparing the tax valuations before and after the government’s revision of valuations in May 2015, it appeared that the changes did not produce the desired results.
Before the revision, tax valuations were on average 14 percent higher than market values, with an average absolute deviation of 36 percent.
After the drop, tax valuations were two percentage points lower, a significant adjustment for a portfolio but inadequate as the average deviation was 33 percent.
According to tables of property values published by To Vima, tax valuation prices in inexpensive or mid-level locations are substantially lower than market prices. But this applies mainly to new constructions, where those exist, while the tax valuation for older properties is equal or higher than the market prices.