Law coming to standardise property values for insurance, land tax, sale

By Marlon Madden

A more standardised process for valuing properties in Barbados is on the horizon, Minister in the Ministry of Finance Ryan Straughn announced on Thursday.

He said new legislation will be taken to Parliament as the government seeks to bring the valuation of property for insurance, land tax payments and property sale in line with each other.

Addressing the opening ceremony of the two-day Royal Institution of Chartered Surveyors and International Property Tax Institute’s 10th Caribbean Valuation and Construction Conference, at Hilton Barbados Resort, the minister said one of the areas of great concern relating to the real estate market was the disparity in valuation of properties for different purposes.

“The value that one puts on your property for insurance purposes versus the value that they put on your property for tax purposes versus the value you want to put on your home when you want to sell it [involve] three different competing objectives. So, you have persons who will object every year to the Revenue Commissioner about the value of their property, but when it comes time to have negotiations about selling that property, all of a sudden the valuation is much higher than what the Revenue Authority has.

“For insurance purposes, as you can appreciate – because we want to ensure that we build resilience – we find ourselves in a situation where persons are underinsured because the valuation they are using with respect to payment of your premium is in conflict,” Straughn pointed out.

It was against that background that he said the government would be introducing new valuation legislation.

“Working with the stakeholders, which we will be doing very shortly, [we will] bring a new valuation bill to Parliament that will help to resolve some of these issues,” he said, though not giving a timeline.

He said getting the right regulations and mix of policies and mechanisms in place was critical, adding that these should give a clear indication of the investment type required, what government incentives would be made available, and how residents and industry stakeholders could collaborate.

The minister also pointed to the need for accurate data on the real estate market to encourage greater investment, saying: “The essence of valuation is going to have to be at the centre, in terms of clean data, to allow us to be able to make good policy decisions in order to ensure that we can unlock true investment at all levels with respect to the real estate market.”

He said creating the right policies will help to “mobilise” some of the billions of dollars in savings into investment in real estate.

“Real estate is one such area that we know that we have not yet given the right structures and opportunities for additional investment in order for ordinary people to mobilise those said resources to be able to benefit from it,” he said.

Straughn said the government was also considering the development of a house price index to better document the sale of property across the country.

Pointing out that the contribution of the industry to the economy was significant, he said he was also concerned that it was still taking too long to complete property transactions.

Straughn gave the assurance, however, that the government will be pressing ahead with the digitisation of the land registry, adding that he believed it should help to significantly reduce the time it takes for the exchange of information and to close a transaction to between seven and 14 days.

“It will require a significant amount of change management, and investment in digitisation to ensure that all of the necessary data related to titles is clean. That is something the government is working on right now,” he said.

At least one banker and a developer agreed that the valuation of properties for various reasons could be closer.

Manager of Corporate Credit with Republic Bank Corey Knight said it can sometimes be confusing for lending institutions when valuations are vastly different.

James Edghill, developer and co-founder of construction development firm One Builders, said he welcomed the idea of a house price index.

“The house price index and sharing of information would be a good start. Real estate agents and valuators here aren’t known for cooperating with each other because they are competitors. So, you take any one firm and the information they have is going to be limited, whereas if you pool all of the information you are going to get a much more full picture.

“The reality is that we are a very illiquid market by any means. So you are going to get wide disparities in the values until there is some more harmonisation of sharing of data,” Edghill told the local, regional and international real estate and construction operators, bankers and global business officials attending the conference which has as its theme, Advancements in Real Estate – Recent Trends Impacting Valuation and Construction.

marlonmadden@barbadostoday.bb