ECONOMY

Objective values set to increase this year

objective-values-set-to-increase-this-year

Athens and the broader metropolitan area are set to see an increase in the property rates used for tax purposes, known as “objective values,” according to the provisional figures collected by property surveyors for the Finance Ministry.

In the Athens city center, the hikes in zone rates are estimated at around 15-20 percent, which will lead to an increase in taxation on transfers. In contrast, as far as the Single Property Tax (ENFIA) is concerned, the government is expected to implement interventions on the rates in order to avoid putting an additional burden on owners and to safeguard last year’s 22 percent average reduction.

In any case, the Finance Ministry is looking at some difficult political decisions ahead as it appears that the recovery of the real estate market and the recommendations by the private surveyors are pointing to an increase in zone rates for many areas around the country.

According to the initial data that surveyors have gathered from on-the-spot inspections, besides different districts in the capital, prices have climbed in most major cities across the country, and it is likely that some significant zone rate hikes will be necessary this year so that the objective values of properties become aligned with the market prices used for the completion of transactions.

The same also applies to various less expensive areas in the capital such as Perama, Keratsini, Kaminia, etc, where the objective values have remained at a level substantially below the minimum construction cost, for social reasons.

Early signs are showing that hikes can be expected in central Athens neighborhoods such as Exarchia, Kypseli, Patissia, Evelpidon, Koukaki, Kolonaki, Ampelokipi, Pangrati, Ilissia and Syntagma.

In downtown Athens the sale rates for apartments posted an increase of more than 25 percent year-on-year in 2019, according to data from real estate agents. Bank of Greece figures show that last year the region of Attica was the champion in house price increases as a result of rising demand from the phenomenon of the short-term leasing market through online platforms such as Airbnb, Booking and Homeaway, as well as the residence permit “Golden Visa” scheme, which has attracted the interest of Chinese, Russian, Lebanese, Turkish and Egyptian nationals, among others.

On an annual basis house prices in Athens recorded a rise of 10.4 percent last year, while the yearly rise amounted to 11.9 percent and 11 percent respectively in the last two quarters of 2019. A similar picture trends has been recorded in the northern port city of Thessaloniki, where prices climbed 6.8 percent in 2019, while in the country’s most popular tourism destinations the increase in rates averaged at 4.5-5 percent.

On the other hand, in areas where rates were already high, such as the northern suburbs of the capital (like Filothei) the zone rates that have been recommended are expected to take the opposite course as sale prices are currently substantially lower than objective values as a result of a shortage in demand.

Prices are on the rise in a multitude of areas around the country, especially at seaside areas that attract the interest of tourists. According to surveyors, in areas with significantly low official zone rates, as for examples on the islands of the Cyclades, the increases recorded range between 20 and 40 percent. There are also difference between market rates and objective values between 20 and 30 percent in parts of continental Greece, also at spots with increased tourism and where holiday homes are an attraction even for business activities (short-term leasing, etc.)

Property surveyors have until March 20 to submit their recommendations to the ministry regarding the level of the new objective values. After that the process passes into the hands of the ministry, which will have to adjust the objective values to the market rates. Given that in 2019 there was an increase in property prices, this is expected to be reflected on the objective values too.

Besides the adjustment of the zone rates, the objective value system will also expand to another 2,900 areas that so far had been left out of the scheme. The ministry has already received some of the recommendations from those areas to enter the official zone rate system for the first time, and several of them point to major increases.

Consequently the new values will increase the tax burden on many owners through the ENFIA and a series of other taxes based on properties. To offset the additional pressure on property owners, the government is planning to implement a further reduction of ENFIA by 8 percent on average, in order for the zone rate hikes to have a smaller or no impact at all on the tax bill for ENFIA that property owners will receive in August.

The ministry is expected to make its final decisions about the new level of the objective values in May. As for the 2020 ENFIA, it will be calculated according to the new objective values.

Surveyors estimate that they determine the market value of the average property in any given zone via the property prices based on comparative figures and by making the appropriate projections. They then submit their recommendations to the ministry about the starting price or zone rate for every area.

The zone rate constitutes the basis used for the determination of the objective value of each property during the taxation of transactions. The quality of the constructions being assessed is taken into consideration by the experts when they set the zone rate, as well as at the specific calculation of the objective value of each property, with the various factors priced in that increase or reduce the value of each asset, such as amenities, the age of the property, its state of repair, etc.