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The need for an up to date Valuation of Properties in Cyprus

The need for an up to date Valuation of Properties in Cyprus . Speaker: Kyriakos Tsolakis Limassol District Lands Officer and Coordinator of Valuation and Management of State Land Branches www.dls.moi.gov.cy , tsolaki@cytanet.com.cy . TABLE OF CONTENTS. Introduction

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The need for an up to date Valuation of Properties in Cyprus

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  1. The need for an up to date Valuation of Properties in Cyprus Speaker: KyriakosTsolakis Limassol District Lands Officer and Coordinator of Valuation and Management of State Land Branches www.dls.moi.gov.cy, tsolaki@cytanet.com.cy

  2. TABLE OF CONTENTS • Introduction • Purpose of General Valuation • Historical background • Major Provisions of General Valuation Law • The CAMAS in the Valuation Section • The Proposed Project • Current issues and externalities • Benefits to the Society

  3. Area:9,252 KM2 Population: 877,800 1. Introduction

  4. Introduction (cont.) MILESTONES OF THE CYPRUS REPUBLIC 1960 – Independent State 1974 – Invasion and occupation of 36% of the territory of Cyprus by Turkey

  5. Introduction (cont.) 1.5.2004 Member of the European Union 1.1.2008 Accession to EURO Currency

  6. 2. Purpose of General Valuation • THE BASIS FOR ALL PROPERTY TAXES IN CYPRUS • Immovable Property Tax • Municipal Tax • Communal Tax • Sewage Tax • Capital Gains Tax • Grants and Benefits

  7. 3. Historical Background • 1st General Valuation • Initiated in 1909 after the introduction of the Immovable Property Tax Law No. 12/1907 • The Law provided the General Surveys, Registration and Valuation in 20 yrs time • Completed in 1929 with a Special Law No. 227/1926)

  8. Historical Background (cont.) • 2nd General Valuation – Based on 1.1.1980 • Implemented and based on the Immovable Property (Tenure, Registration and Valuation) Law, Cap. 224, 1.9.1946 • Order issued by the Council of Ministers- P.I.N 2/1982 • Completed in 12 years

  9. 4. Major Provisions of General Valuation Law • Immovable Property Law {S.2 (1)} • land • Buildings and other erections • Water rights • Undivided shares • Privileges • Liberties • Easements • Rights restricting the use

  10. Major Provisions of General Valuation (G.V) Law (cont.) • Part VII – General Valuation, Cap. 224 • Section 66 – Valuation of Imm. Property • Valuation can be conducted when decided by the Director or when requested by the registered owner • Determine provisional value for taxes and fees purposes. The Director has the right to revise the value • The valuer shall comply with the values situated in the same, neighboring or similar area

  11. Major Provisions of (G.V) Law (cont.) • Section 67 - Revaluation • After 5 years from the 1st Valuation, it can be conducted • When decided by the Director or through an application of the registered owner • Revaluation can be conducted in less than 5 yrs if : • There is substantial reconstruction • Erection of Building • Demolition of Building • that affects substantially the value of the property • c) or a new G.V is Ordered under Section 69

  12. Major Provisions of (G.V) Law (cont.) • Section 68 - Valuers • Valuation or Revaluation – conducted by valuers who are appointed by the Council of Ministers • Shall take an Oath in Court • Section 69 - G.V of Imm. Property • (1) The Council of Ministers may Order a G.V for the purpose of securing • up –to –date • Uniform Valuations

  13. Major Provisions of (G.V) Law (cont.) Section 72 – Undivided Shares Value is based on the whole share b) Property can be valued through an application of any one or more co owners c) Objections by one or more co owners d) The Director’s decision or the Court is decision for any co owner, is applicable for the whole share

  14. Major Provisions of (G.V) Law (cont.) • Section 73 – Valuation/Revaluation is valid until it is changed • Section 74 – Written objection to the value of any property against the Director’s decision, indicates a fee of €17.

  15. The CAMAS in the Valuation Section (i) Computer Integrated Land Information System 29/11/2012

  16. The CAMAS in the Valuation Section • Valuation Models • Direct Comparison Method • Direct Rental comparison Method and Income capitalization • Land Models (residential, Commercial, Industrial, undeveloped land, agricultural land) • Unit Models (residential, tourist establishments, schools, hospitals/clinics, livestock) • Base Cost Models ( commercial, industrial)

  17. 6. The Proposed G.V. Project Medium Term Plan (2 - 4 years) Property field data capture Data input into CAMAS Continues updating of data Mass Appraisal of properties Notification to the taxpayers and right of objection through the DLS website Interchange of data with all relevant central and local authorities

  18. The Proposed G.V. Project (cont.) • Existing statistical data for data capture • Approx. 1.664.740 registrations, or 2.100.000 subproperties • Approx. 645.000 residential units, 100.000 commercial and tourist establishments units • Existing human resource is inadequate to implement this project

  19. The Proposed G.V. Project (cont.) Data Capture Strategy Methodologies: From internal and external sources of information of the Department and 3D aerial photography The data capture of properties can be divided into two subprojects Data capture of vacant land (600.000) Data capture of buildings (750.000)

  20. Field Data Capture using latest technologies The Proposed G.V. Project (cont.)

  21. The Proposed G.V. Project (cont.) • Required Resources for Data Capture • Temporary staff (400 persons), Cost € 12m • Permanent staff for maintaining new buildings • (40 persons), Annual cost € 700.000 • Ancillary Costs: Rents, equipment, peripherals etc. € 2m • Required Resources for General Valuation • Permanent staff (60 persons), Cost € 8m • Ancillary Costs: Rents, equipment, peripherals etc. € 2m • Time Horizon • Data Capture: 2 Yrs General Valuation: 2 Yrs

  22. The Proposed G.V. Project (cont.) • Cost/Benefit Analysis • Income versus Costs: Net Present Value €30m after the completion of the new General Valuation in 4 yrs time • Payback period of loan 4yrs

  23. The Proposed G.V. Project (cont.) • The project of General Valuation requires effective and efficient management of resources to be successful • Planning • Organizing • Leading • Staffing • Controlling

  24. 7. Current Issues and Externalities • The existing basis of property taxation on 1.1.1980 prices is out of date (32 yrs old) • It produces injustice between the citizens • The current system is outdated compared with modern best practices of advanced economies • Inefficient and ineffective to support new kind of taxes (e.g Development land tax, Environmental tax, Wealth tax, Grants and benefits) • Incapable of supporting decision making in central and local government finance and tax policy matters

  25. Current Issues and Externalities (cont.) • Incapable of supporting effective Land Policy and promoting transparency and efficiency in the Property Market • Tax Rates • The tables below, display how property tax on 1.1.1980 prices has changed to increase revenue: Historical Existing (as at 1.1.2012) Proposal

  26. 8. Benefits to the Society • 1. Budget Effects • Increase revenue at Central and Local Level • 2. Market Effects • Improve information and minimise inefficiencies of the Property Market • Secure transparent and efficient investment property markets • Administrative tool in monitoring trends of the property market, exposure to mortgage risks and overheated markets

  27. Benefits to the Society (cont.) • 3. Fiscal Policies • Assist government in planning and implementing fiscal policies • Assist government in implementing Property Indices and Performance Measurements • Assist in promoting new and effective Tax Policies. • 4. Fairness and Equity • Secure Uniform Tone of the Valuations and achieve just and fair Property Tax for each citizen

  28. Benefits to the Society (cont.) • Administrative Effects • Administration cost of property tax system can be minimized • The Property tax system can be simplified and made more flexible to meet the needs of the changing environment • Achieving certainty of property tax payments by the taxpayers

  29. Thank you for Your Attention

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