Within the past week the new notices of valuation have been arriving at mailboxes around the island. In Barbados, every three years is a valuation year. The last valuation year was in 2008, thus making this year, 2011, a valuation year as well. Here is a quick background on the valuation legislation and the process to be followed.
The Commissioner of Land Tax is required by law to assess the value of all properties in Barbados every three years (Crown properties and a few others are exempt). The assessment made must be on the basis of market value as defined in the legislation. The tax payable on each property is determined by applying a rate of tax (depending on the type of property) and taking into account any special exemptions or rebates that might apply to the particular tax payer or use of the property. For example pensioners get a rebate on their primary residence, and land used in agriculture gets a rebate, and c hurches do not pay tax at all. For today’s discussion the important point is that at the end of March 2011 every property was assessed a value by the Commissioner, and that value must be fair market value.
Let us now look at the real estate market over the past three years in Barbados so that we can understand the trends and perhaps project what we think the Commissioner would have determined the market values to be based on the actual market data. Remember that our comments will be based on the general categories of properties in the market – each specific property must be evaluated on its own merits. Also it is useful for the reader to remember that in the 2008 valuation year the Commissioner recorded significant increases in values. For this discussion we have broken down the market into the segments shown below and concluded on an average change in value over the 2008 to 2011 period.
Each of these categories could be further broken down but frankly the more narrow the category the less accurate the generalized trend. You will immediately see that in our opinion the only category of property that potentially has seen any increase in value over the period is commercial property. Our basis for conclusion on the change in value over the period comes from the data that we collect on actual transactions and on properties on offer during the period. At present our database contains records on over 18,000 property transactions in Barbados. It is important to note that the Land Tax Department is only informed of actual sales locally after the transaction has been completed. There is some time delay. Our information is derived from direct participation in the market.
So how can this information help you? We believe that the starting point is the same as it was in 2008 when we last wrote about this process. You should test the valuation for reasonableness based on your own knowledge. Many of you will have property values below what you would accept in a sale and therefore you should accept the valuation assessment, bearing in mind that if it is substantially lower than actual value you do face the risk that if the property were to be compulsorily acquired you will be starting in a weak position to argue for higher compensation. If you think that the valuation may be higher than actual, then we suggest that you compare your property value using the 2008 valuation and the chart above. If the change falls outside of this range you should investigate further.
Based on the limited assessment notices that we have seen thus far, we have concluded that there is a trend for a revaluation of values upwards. This is frankly not in keeping with market reality. There are very few properties that will sell for more in today’s market than they would have sold for at the peak of the property boom in 2008 when they were last assessed. There are strong grounds for objection in these cases.
The Government of Barbados finds themselves in a difficult position with a rising current account deficit. With the fall in property values there will be a significant decline in property taxes collected that will further compound the Government’s cash position. Just as the international banks learnt three years ago, property prices do not always go up, and when you choose a period for comparison that starts at the height of the property price bubble and ends with the point three years after, with no recovery seen, it should not be a surprise to anyone that the property values will be substantially less. We have heard from many clients over the past three years that they felt it unfair that their property was carrying an assessment for three years at a value established in the boom year. This is now the time for correction as the law only provides for changes in the interim period in a very narrow set of circumstances.
If you wish to object to your assessment you have three0 days from the date of your notice to do so. The following link will allow you to download the land tax objection form. You do not have to employ a valuer like us to file the objection on your behalf, but you will have to defend your opinion. Most often you will find it useful to attach a professional valuation report to your objection to substantiate your position, or simply to have the valuer lodge the objection on your behalf. In most cases the valuation fee is substantially less than the tax saved over the period, assuming a successful objection.
Each of us has an obligation to pay our share of taxes, but we certainly have no obligation to pay more than our share. It is a matter of principle that your property must have a fair assessment as it not only determines the property taxes you pay but is also reflective of the overall property values for the country as a whole. Let us all make sure that we are dealt with fairly. Let us know if we can help.