Pricing homes

Pricing homes

Mon, Mar 18, 2013, 06:00

For much of the economic boom homeowners were quite happy to talk up the value of their houses. With the downturn, and introduction of the local property tax, they are now talking down their value. Since 2006 house prices have fallen by more than half from their peak. This boom and bust cycle presents problems for the Revenue Commissioners in providing accurate guide prices to assist homeowners in valuing their houses for tax purposes. Homeowners too face difficulties in deciding the market value of their home.

The housing market has yet to recover. Fewer sales have made it far harder to value property. So while Revenue provides an estimate of a homeowner’s tax liability – which may be overestimated or underestimated – it remains a suggested guide price and not a binding valuation. The onus lies with the homeowner to assess the market value of the house, and to pay the appropriate tax. That, however, is not easy to establish without an active housing market where transactions of buyers and sellers set real prices. Given that difficulty, Revenue must make adequate allowance for price uncertainty, when assessing property tax returns. In these unusual circumstances, the margin of error can be high.

Politically, heightened anxiety among property owners as a consequence of uncertainty risks heightening animosity towards those in government who have little choice to diversify the tax base. Nevertheless, homeowners are required to act honestly. Failure to do so, by mis-declaring or underestimating the value of property, could risk penalties, fines and the increased possibility of a tax audit. Homeowners must complete and return a self-assessment tax form by May. But with almost two million homeowners subject to the tax, many of whom have not yet received Revenue’s estimate, that will afford some with little time to ensure tax compliance. In the circumstances, Revenue should provide greater clarity and certainty for taxpayers meeting their obligations and consider extending that payment deadline.