APPRAISAL LEVEL (Median Ratio) - LARNACA DISTRICT AND ALL ... · There is an inherent limitation of a small number of observations in this study and as noted by the IAAO standard,

REPUBLIC OF CYPRUS DEPARTMENT OF LANDS AND SURVEYS

MINISTRY OF INTERIOR

Report on:

Assessment of the variance between GV

assessed values 01.01.2013

and

Market Price

1,06

0,80

1,00

0,930,88

0,79

0,90

0,94

0,74

0,88

1,21

1,00

0,77

0,98

0,77

0,95 0,84 0,93

0,15

0,35

0,55

0,75

0,95

1,15

Aradippou M

unic. - Res. Fields

Rural Areas - Res. Fields

Rural Areas -Tourist Fields

Larnaca Munic. - Res. Building

sites

Aradippou M

unic. Res. Buildingsites

Drom

. -Meneou M

unic. -Res.Build. sites

Livadia Munic. - R

es. Building sites

Rural Areas - Res. Building sites

Rural Areas - Touristic Buildingsites

Larnaca Munic. - Flats H

D

Larnaca Munic. - Shops H

D

Larnaca Munic. - O

ffices HD

Aradippou M

unic. - Flats HD

Drom

olaxia -Meneou M

unic. -Flats H

D

Livadia Munic. - Flats H

D


D

Rural Areas - Flats HD

Rural Areas - Houses H

D

APPRAISAL LEVEL (Median Ratio) - LARNACA DISTRICT AND ALL PROPERTY TYPES

Median

Ratio

IAAO Standard -Lower limit (0,9 <=MR )

IAAO Standard - Higher Limit (MR=<1,1 )

General Valuation and Taxation Section

Varnavas Pashoulis

Maria Charalambous

Valuation Section

Efi Savvidou

January 2015

Table of Contents

Executive Summary ........................................................................................................... 1

1. Introduction .................................................................................................................. 4 1.1 Terms of Reference .......................................................................................................... 4 1.2 Objectives of the study ..................................................................................................... 4 1.3 The concept of market value and assessment accuracy ................................................... 5 1.3.1 Market definition and legislation ...................................................................................... 5 1.3.2 International Practice ....................................................................................................... 5

1.4 Aspects of Appraisal Performance ................................................................................... 6 1.5 Applicability ..................................................................................................................... 7

2. Process adopted in the Ratio study .......................................................................... 7 2.1 Classes of properties included in the study ...................................................................... 7 2.2 Collection and Preparation of sales data ......................................................................... 13 2.3 Matching of Appraisal and Market Data ........................................................................ 15 2.4 Sampling and Limitations of Sales ................................................................................. 15

2.5 Period of sales used and Time Adjustment .................................................................... 16 2.6 Data Accuracy and Integrity ........................................................................................... 17

3. Inherent Limitations of the Ratio Study ................................................................... 17 3.1 Limited number of sales ................................................................................................. 17

3.2 Outlier Ratios .................................................................................................................. 18 3.2.1 Nicosia District – Comments on Outliers ...................................................................... 18

3.2.2 Limassol District - Comments on Outliers .................................................................... 20 3.2.3 Larnaca District - Comments on Outliers ...................................................................... 20

3.2.4 Famagusta District - Comments on Outliers ................................................................. 21 3.2.5 Paphos District - Comments on Outliers ........................................................................ 21

4. Sample Representativeness .................................................................................... 22

5. Ratio Study Statistics and Analysis .......................................................................... 22 5.1 Measure of Appraisal Level ........................................................................................... 22 5.2 Measure of Variability (Appraisal Uniformity) .............................................................. 22

5.2.1 Coefficient of Dispersion ................................................................................................ 23 5.2.2 Other measures of variability ........................................................................................ 23

5.3 Measure of Reliability .................................................................................................... 23 5.4 Vertical Inequity ............................................................................................................. 24

6. Ratio Study Results ..................................................................................................... 25 6.1 Nicosia District ............................................................................................................... 25 6.1.1 Evaluation of the Nicosia District Ratios ....................................................................... 26 6.2 Limassol District............................................................................................................. 27

6.2.1 Comments on Limassol District Ratios .......................................................................... 27 6.3 Larnaca District .............................................................................................................. 28 6.3.1 Comments on Larnaca District Ratios ............................................................................ 29 6.4 Paphos District ................................................................................................................ 30 6.4.1 Comments on Paphos District Ratios ............................................................................. 30

6.5 Famagusta District .......................................................................................................... 32

6.5.1 Comments on Famagusta District Ratios ....................................................................... 32

6.6 Other Comments ............................................................................................................. 33

7. Conclusions ................................................................................................................ 33 7.1 Summary of Ratio Study Results................................................................................... 33

7.1.1 Residential Fields ........................................................................................................... 33 7.1.2 Residential Building Sites .............................................................................................. 34

7.1.3 Horizontally Divided Units (HDU) ................................................................................ 35 7.1.4 Non- Horizontally Divided Units (NHDU) .................................................................... 35

7.1.5 Summary of Ratio Study Results for Commercial Properties ........................................ 36 7.1.6 Other Comments on Ratio Study Results ....................................................................... 37

7.2 Time Adjustment and Quality of Results ...................................................................... 37 7.3 Data Availability and Quality ......................................................................................... 37 7.4 Comments on the Uniformity, Level of Appraisal, and Vertical Equity ........................ 37 7.4.1 Uniformity ...................................................................................................................... 37

7.4.1.1 Building Sites .......................................................................................................... 38 7.4.1.2 Horizontally Divided Units (Flats) .......................................................................... 40 7.4.1.3 Non - Horizontally Divided Units ........................................................................... 43 7.4.1.4 Residential Fields .................................................................................................... 45 7.4.2 Level of Appraisal (Median Ratio) ................................................................................. 46

7.4.3 Vertical Equity (PRD) ................................................................................................... 52 7.4.4 Conclusions on the findings of holistic graphical presentation of COD, Median Ratio

and PRD indicators .................................................................................................................... 58 7.4.5 Comments on Outliers .................................................................................................... 58 7.5 Application of Geographic Information Systems in Ratio Study Analysis and Results 59

7.6 Property Market Sentiment and its Limitations for the Study ........................................ 63

7.7 DLS Capabilities in Ratio Studies as a Tool for Quality Assurance in GV

Process ......................................................................................................................... 63

8. Recommendations ................................................................................................... 64 8.1 Short term planning ........................................................................................................ 64

8.2 Medium term planning ................................................................................................... 65

Glossary ............................................................................................................................ 66

References ...................................................................................................................... 67

ABBREVIATIONS AND ACRONYMS

AV Assessment Value

CAMA Computer Assisted Mass Appraisal

CBC Central Bank of Cyprus

COD Coefficient of Dispersion

CYSTAT Statistical Office of Cyprus

CILIS Cyprus Integrated Land Information System

DLS Department of Lands and Surveys

EC European Commission

ECB European Central Bank

GVTS General Valuation and Taxation Section

GIS Geographic Information System

HDU Horizontally Divided Units

NHDU Non-horizontally Divided Units

IAAO International Association of Assessing Officers

IMF International Monetary Fund

IPT Immovable Property Tax

LI Local Inspection

MV Market Value

MR Median Ratio

MoF Ministry of Finance

MoI Ministry of the Interior

MoU Memorandum of Understanding

PRB Price Related Biased

PRD Price Related Differential

RPPI Residential Property Price Index

SP Sale Price

VGV Value of General Valuation

TA Technical Assistance

VS Valuation Section

APPENDICES

Appendix A: Ratio Study Statistical Outputs by District and Property Type in SPSS A.1 Nicosia District

A.2 Limassol District

A.3 Larnaca District

A.4 Paphos District

A.5 Famagusta District

Appendix B CBC Residential Property Price Index

Appendix C RICS Cyprus Property Index

Department of Lands and Surveys Page 1/67

Executive Summary

The key objective of this study is to conduct an assessment of the variance between the recent

GV assessed values and market price, which forms part of the obligation of the Cyprus

Authorities to the EC/ECB/IMF under measure 3.8 of the MoU.

This ratio or variance study is a mechanism by which the quality of assessment can be evaluated

after the assessment of values have been produced but before the publication and notification of

results to the taxpayers. Between this period, adequate time should be allowed to the valuers to

test the results and if needed, to proceed with calibration or corrective actions. This study has

measured and evaluated the level and uniformity of the recent GV, assessed the existing quality

assurance processes, identified appraisal priorities and benchmarked the results against IAAO

standards.

For the purpose of this study, two main archives have been used from CILIS. The first one

concerns sale transactions one year before and one year after the assessment date and the second

one were the recent GV results. The two archives have been merged into one file, cleansed and

filtered. Also outliers have been excluding for the purpose of this study. A number of issues

associated with the study have been identified, investigated and reported in this document so that

in any future or similar study, these will be taken into consideration. A special section has been

written in this study describing a number of outliers that have been identified (see chapter 3.2).

The main outliers were the mismatch between the characteristics recorded at the date of the sale

and GV date.

The sale transactions used for this study have been divided into two major categories. The first

category is vacant land only and the second one is buildings. These were analysed by district,

urban and rural areas as well as by property type. The total number of sale transactions used

separately for vacant land and buildings were 3.195 and 6.164, respectively. The process of

recording the sale transactions within the DLS is described in detail in chapter 2.2.

The sale transactions selected for analysis one year before and after the crucial date were not

time adjusted. According to the IAAO standards, the closer the sale date to the crucial GV date

the better the results. The most accurate results can be obtained by time adjusting all sale

transactions regardless of the period selected, other things being equal.

Data quality, availability and representativeness of data have a crucial role to play as regards the

accuracy of the ratio results. One of the limitations of this study was the low number of sale

transactions as compared with the previous years due to the economic recession the first signs of

which appeared in 2008. Sale transaction numbers have fallen from 2008 to 2014 by 56,63%.

A summary of the ratio study results is outlined in the following paragraphs based on the main

three measures, namely, uniformity (COD), level of appraisal (MR) and vertical equity (PRD)

and were benchmarked against the IAAO standards.

Uniformity Measure (COD)

The ratio study results prove that the COD indicator is sound and acceptable in all districts in

respect of building sites and horizontally divided units (flats) with some observations that need

further analysis because they fall outside the standard limits. As regards non horizontally

divided units (houses) and residential fields, the ratio results indicate that the COD is relatively

close to the standard limits with the exception of some geographical areas where further


investigation is needed (e.g. buffer zone, double zones, different or change in physical and legal

characteristics, mixed uses, mistaken data entries, missing values). More detailed description

including graphic presentations is shown in chapter 7.4.1.

Level of Appraisal (Median Ratio)

The level of appraisal is measured by the indicator median ratio. The conclusion is that most

observations are within and some below the IAAO standard and a few are above the standard

limits. Further investigation is needed for those observations that fall outside the limits. The

ratio study results of the appraisal level by district and all property types as compared with the

IAAO standard are also presented graphically in chapter 7.4.2.

Vertical Equity (PRD)

Price Related Differential (PRD) is a measure of the systematic differences in the appraisal of

low and high value properties from the market value. The ratio study results have an inherent

weakness due to the limited number of observations. According to the IAAO standard when the

samples are small, they may have high dispersion, or include properties with extreme values, the

PRD may not provide an accurate indication of assessment regressivity or progressivity.

The conclusion is that most observations are within and some above the IAAO standard. Further

investigation is needed for those observations that fall outside the limits. The PRD results by

district and property type are presented in detail in chapter 7.4.3 with a series of graphs as well

as the respective benchmark in accordance with the IAAO standard limits for comparison

purposes.

Concluding Remarks

The concluding remarks for the statistical findings of this study are that COD assessment is very

good which purports that the recent general valuation has achieved a very good level of

uniformity (horizontal equity) to the taxpayers. In other words, assessed values are spread at

equal distances between the median value.

In respect to the median ratio, the study has proved that the assessed values are located within

the lower limits of the standard or fall just below the lower limits as defined by the IAAO

standard. In other words, the median overall assessment values fall within the lower limit or are

very close to the lower limit and this is very much neutralized for the taxpayer when combining

the results with the good COD assessment results. The tendency of the median assessment

indicates that the GV prices are relatively lower than the market values or are very close to the

lower limits defined by the IAAO standard.

The third indicator which is the PRD (vertical equity), the study has proved that the overall

tendency is that the ratio is concentrated within the upper limit or close but above the upper limit

as compared with the standard. There is an inherent limitation of a small number of observations

in this study and as noted by the IAAO standard, this tends to show that PRD is high.

Furthermore, as in our case the PRD indicator is concentrated on the upper level of the standard

limit, regressivity can be observed. That means, high value properties are under-appraised or

lower value properties are under-appraised. Further investigation and analysis should be a

continue process of improving the quality of the data and the quality of appraisal by the DLS.

The GV and Valuation Branches have presented the sales ratio values of building sites for

Lakatamia Municality on a map by applying GIS tools. The Branches will make every effort to


fully utilize and apply GIS tools in performing quality assurance and quality control in the

variance analysis (ratio studies).

It is important to highlight the aforementioned study results were based on sale transactions that

have not been time adjusted, either forward or backwards to the recent GV date (01.01.2013) and

thus if time adjustment was applied for all sales, the results could have been improved.

Furthermore, DLS has identified and examined a number of observations that are considered

outliers after the ratio study results and these have been excluded from the analysis. The type of

each outlier has been categorized and instructions were also given at district level, to reassess

those observations that appear in the data sets. In addition, specific geographical areas in all

districts that outliers have been observed (mainly rural areas), instructions were also given for

reassessment and where needed to determine micro-location areas. These geographical areas

will then be revalued and the affected owners will be informed. Furthermore, the General

Valuation and Valuation Branches are examining and revaluating where necessary all

applications lodged for correction of errors or valuation objections. International practice in

various countries as regards the total number of corrections/valuation objections is about 3% to

5%, but this is dependent on various factors. At this point in time, this figure for Cyprus is at

1,4% (17.387 properties) but is expected to increase slightly, when adding all other reassessment

procedures that the DLS is currently performing internally. Also, the deadline for applications

for valuation objections has been extended to the 25th

April 2015 (total of nine months).

Every effort will be made by the DLS to complete the aforementioned refinements before the

imposition of the tax year 2015. It is evident that the DLS has made everything possible to

secure that the new tax year will be as fair as possible and equitable to the taxpayers. An

additional safeguard to the taxpayer is the legal provision of refund for any excess property taxes

after successful applications for error corrections and valuation objections by the taxpayers.

Finally, a number of recommendations have been put forward by the DLS as a step forward after

interpreting the results of this study, which forms part of a short to medium term planning.

These cover data capture and data quality issues, limitations, data extraction modules, legal and

business procedures and methods including time adjustment approaches. These are fully

described in chapter 8.


1. Introduction

1.1 Terms of Reference

The preparation of this study is an obligation of the Cyprus Authorities to the EC/ECB/IMF

under Measure 3.8 of the MoU. This obligation is described below:

“The Cypriot authorities will reform the immovable property tax with the objective

to improve the fairness of the tax burden and to increase the efficiency of the tax

administration.

To this end, the authorities will conduct an assessment of the variance between GV

assessed values and market price by Q4-2014”

In response to this request, the DLS has prepared this study which was the joint effort of

Varnavas Pashoulis (Senior General Valuation and Taxation Officer) and Maria Charalambous

(Land Clerk – Mathematician/Statistician) who performed the various statistical outputs. Also,

Efi Savvidou (Senior Valuation Officer) contributed to the preparation of this report and

participated in discussions of various issues in respect of the statistical analysis, outputs,

valuations and outlier issues. Furthermore, the five District Approved Valuation Officers,

namely Maria Georgiou (Land Officer A’), Anastasios Aristidou (Land Officer B’), Eleftherios

Eleftheriou (Land Officer B’), Stephanos Rousias (Land Officer B’) and Panayiota Flori (Land

Officer B’- Data Capture Coordinator) provided comments on the statistical ratios, valuations

and outliers. Aristi Christofidou (Limassol District Officer) also contributed to this effort,

especially in the preparation and cleaning of the sales data and property characteristics. For the

preparation of the sales data support was also provided by the staff of the Valuation Section as

well as from the General Valuation and Taxation Section at each District Office. In addition,

Neoclis Neocleous (CILIS Support and Administration Section Leader) provided the various

sales datasets needed for the analysis of this study. Klito Demetriou on behalf of the

Cartography Branch also helped in the preparation of a number of maps.

1.2 Objectives of the study

This study can help the DLS Valuers to improve appraisal methods or identify geographical

areas by property type which may need more analysis as regards the quality of appraisal. The

study is usually referred to as a “ratio study”, which is a generic term for sales based studies

designed to evaluate appraisal performance. Some others refer to it as a variance study, which is

defined as the “variance between the assessed values and the market price (sales prices)”.

The ratio study is a mechanism by which the quality of assessment can be evaluated after the

assessment of values has been produced but before the publication and notification of results to

the taxpayers is made. Between this period, adequate time should be allowed to the valuers to

test the results and if needed, to proceed with calibration or corrective actions.

Practically, the study should

Measure and evaluate the level and uniformity of mass appraisal values

assess the existing internal quality assurance and identify appraisal priorities

determine whether administrative or legal or technical standards have been met


1.3 The concept of market value and assessment accuracy

1.3.1 Market definition and legislation

It is important in any such study to describe the different definitions used, because different

countries may use other terminologies or definitions either because these are defined in their

technical standards or these are part of their national law.

In Cyprus, under Section 2 of the Immovable Property (Tenure, registration and valuation) Law,

Cap. 224,

“value of general valuation” in relation to immovable property means the amount

that arises from the conduct of a general valuation or re-evaluation or review of

general valuation, which is the closest possible to the value.

Under the same section above,

“Value” in relation to immovable property means the amount that the real estate

might be expected to fetch if it were sold in the free market by a willing seller acting

voluntarily on a willing buyer.

The above definitions are applicable for General Valuation purposes and are applied

consistently by the DLS valuers.

As regards the sales prices registered in the DLS, the relevant legislation is governed by Cap.

219 (Lands and Surveys - Fees and Charges).

Under Section 2 of this Law, the following definitions apply:

“market Value”, in relation to immovable property, means the amount by which the

property is expected to realize in the open market

“sale price” in relation to the declaration of transfer of immovable property by sale,

means the price that is declared in relation to the declaration of transfer from the

transferor to the transferee for which the property is transferred.

The slight different definitions between the “value of general valuation” and the “sale

price”, does not affect the quality of the study, because in actual terms, both values are

estimated based on market value definition.

1.3.2 International Practice

The term market value is usually interpreted by the valuation profession in Cyprus as to be the

same with definition noted under the International Valuation Standards (IVS). Market value

is defined as

“The estimated amount for which a property should exchange on the date of

valuation between a willing buyer and a willing seller in an arm’s-length transaction

after proper marketing wherein the parties had each acted knowledgeably, prudently

and without compulsion”


The aforementioned definition is the same as defined by the Royal Institution of Chartered

Surveyors (RICS) – Valuation – Professional Standards 2014.

In some countries, they have similar definition of value related to general valuation for property

taxation purposes. For example in Lithuania, they have the following definition:

“Average market value of immovable property” shall mean the value of the objects

of immovable property having the same principal purpose of use, reflecting the

average market price of immovable property in the territory (area) concerned and

determined with the help of mass valuation using the property valuation methods

provided for in the Republic of Lithuania Law on Basics of Property and Business

Valuation.

In UK and for the purpose of Council tax for residential properties, the following definition

applies:

“the value of any dwelling shall be taken to be the amount which, the dwelling might

reasonably have been expected to realise if it had been sold in the open market by a

willing vendor” Also, a number of other assumptions coexist.

In Spain, the definition of market value for property tax purposes is

“the most probable price for which a property free of charge could be sold”

The leading International Professional Body on Mass Appraisals is the International Association

of Assessing Officers (IAAO) and market value as defined by professional standards (Standard

on ratio studies 2013) is

“The most probable price which a property should bring in a competitive and open

market under all conditions requisite to a fair sale, the buyer and the seller each

acting prudently and knowledgeably, and assuming the price is not affected by undue

stimulus”

It should be noted that a single sale could only be an indication of the true market value. The

ratio study represents the market values of a group of properties and not a single value.

The ratio is calculated by dividing the assessment value with the sales price (A/S ratio).

Recorded sale prices are considered to be the most objective estimates or indicators of market

values under normalized economic conditions.

1.4 Aspects of Appraisal Performance

Three mayor aspects are important when performing a ratio study. The first one is the level of

values, the second one is the uniformity and the third one is the vertical equity. Appraisal level

refers to the overall ratio between the general valuation assessment and the market values.

Uniformity means the degree to which properties are appraised at equal percentages of market

value. Vertical equity measures the systematic differences in the appraisal of low and high value

properties from the market value.


1.5 Applicability

The ratio study can assist the DLS in providing fair and equitable assessment of all property.

Ratio studies provide a means for testing and evaluating mass appraisal valuation models to

ensure that value estimates meet attainable standards of accuracy.

2. Process adopted in the Ratio study

2.1 Classes of properties included in the study

Property data have been grouped into two main categories. The one concentrates on vacant land

and the second one on buildings. For the purpose of this analysis, sales have been selected

within the period of 01.01.2012 to 31.12.2013, by district, then by urban (municipal authorities)

and rural (communal authorities) areas. For land, sales were stratified by land use and for

buildings with building use. This stratification is presented below:

A. Land Category

Fields:

Nicosia District Residential CommercialIndustrial / Light

IndustrialAgricultural Others Totals

Nicosia Municipality 5 0 0 0 0 5

Agios Dometios Municipality 0 0 0 0 0 0

Aglantzia Municipality 12 0 0 0 0 12

Geri Municipality 12 0 0 15 1 28

Egkomi Municipality 1 0 0 0 0 1

Dali Municipality 10 0 3 7 2 22

Lakatamia Municipality 19 0 0 6 1 26

Latsia Municipality 3 0 0 4 0 7

Strovolos Municipality 5 0 0 0 0 5

Tseri Municipality 16 0 0 5 3 24

Rural 69 0 3 315 154 541Total 671

Land Sales 01.01.2012 -31.12.2013 (Fields)

Limassol District Residential Commercial

Industrial /

Light

Industrial

Agricultural Touristic Others Totals

Limassol Municipality 5 2 1 3 0 2 13

Agios Athanasios Municipality 1 0 0 1 0 0 2

Germasogia Municipality 11 0 0 0 0 6 17

Kato Polemidia Municipality 0 0 0 1 0 0 1

Mesa Geitonia Municipality 1 0 0 0 0 0 1

Ypsonas Municipality 3 0 1 0 0 8 12

Rural 116 0 0 81 6 111 314

Total 360



Larnaca District Residential Commercial

Industrial /

Light

Industrial


Larnaca Municipality 0 0 0 0 0 0 0

Athienou Municipality 6 0 1 6 0 1 14

Aradippou Municipality 26 0 2 21 0 15 64

Dromolaxia -Meneou Municipality 0 0 0 0 0 0 0

Livadia Municipality 4 0 1 2 0 1 8

Pano Lefkara Municipality 0 0 0 2 0 15 17

Rural 33 0 2 84 19 102 240

Total 343


Paphos District Residential Commercial

Industrial /

Light

Industrial


Paphos Municipality 4 1 0 0 6 0 11

Geroskipou Municipality 3 0 0 0 0 0 3

Pegeia Municipality 1 0 0 2 0 3 6

Polis Municipality 0 0 0 0 0 0 0

Rural 29 1 4 69 7 59 169

Total 189


Famagusta District Residential Commercial

Industrial /

Light

Industrial


Agia Napa Municipality 3 0 0 7 8 10 28

Deryneias Municipality 6 0 1 3 0 11 21

Paralimni Municipality 18 2 1 27 14 6 68

Sotiras Municipality 0 0 0 4 2 11 17

Rural 4 0 0 18 0 39 61

Total 195


Building Sites:

Nicosia District Residential CommercialIndustrial / Light

IndustrialAgricultural Others Totals











Rural 107 0 0 9 22 138

Total 475

Land Sales 01.01.2012 -31.12.2013 (Building Sites)


Limassol District Residential Commercial

Industrial /

Light

Industrial


Limassol Municipality 41 2 3 0 0 2 48

Agios Athanasios Municipality 49 2 0 0 0 1 52

Germasogia Municipality 47 9 0 0 3 1 60

Kato Polemidia Municipality 8 0 0 0 0 0 8

Mesa Geitonia Municipality 5 0 0 0 0 1 6

Ypsonas Municipality 26 3 0 0 0 0 29

Rural 181 1 0 0 5 10 197

Total 400


Larnaca District Residential Commercial

Industrial /

Light

Industrial


Larnaca Municipality 32 0 1 0 0 1 34

Athienou Municipality 3 0 0 0 0 0 3

Aradippou Municipality 73 1 0 0 0 0 74

Dromolaxia -Meneou Municipality 8 0 0 0 0 0 8

Livadia Municipality 19 3 0 0 0 0 22

Pano Lefkara Municipality 0 0 0 0 0 0 0

Rural 95 0 0 0 5 10 110

Total 251


Paphos District Residential Commercial

Industrial /

Light

Industrial


Paphos Municipality 18 3 0 0 0 0 21

Geroskipou Municipality 9 0 0 0 0 0 9

Pegeia Municipality 12 0 0 0 3 0 15

Polis Municipality 8 0 0 0 0 0 8

Rural 57 0 2 49 0 122 230

Total 283


Famagusta District Residential Commercial

Industrial /

Light

Industrial


Agia Napa Municipality 1 0 0 0 0 3 4

Deryneias Municipality 2 0 0 0 0 0 2

Paralimni Municipality 17 0 0 0 1 0 18

Sotiras Municipality 0 0 0 0 0 0 0

Rural 2 0 0 0 0 2 4

Total 28



B. Unit Category

Buildings Horizontally Divided:

Nicosia District Flats Houses Shops Offices

Industrial /

Light

Industrial

Totals











Rural 19 1 0 0 0 20

Total 1.479

Sale Units Horizontally Divided 01.01.2012 -31.12.2013

Limassol District Flats Houses Shops Offices

Industrial /

Light

Industrial

Totals

Limassol Municipality 564 12 26 30 1 633

Agios Athanasios Municipality 76 14 1 0 0 91

Germasogia Municipality 198 57 10 0 0 265

Kato Polemidia Municipality 84 0 2 1 0 87

Mesa Geitonia Municipality 51 0 3 2 0 56

Ypsonas Municipality 27 5 0 0 0 32

Rural 154 95 5 0 0 254

1.418


Larnaca District Flats Houses Shops Offices

Industrial /

Light

Industrial

Totals

Larnaca Municipality 418 4 28 11 0 461

Athienou Municipality 0 0 0 0 0 0

Aradippou Municipality 109 4 1 0 0 114

Dromolaxia -Meneou Municipality 12 2 0 0 0 14

Livadia Municipality 65 6 0 0 0 71

Pano Lefkara Municipality 0 0 0 0 0 0

Rural 225 116 0 0 0 341

Total 1.001



Paphos District Flats Houses Shops Offices

Industrial /

Light

Industrial

Totals

Paphos Municipality 455 88 15 1 0 559

Geroskipou Municipality 32 9 1 0 0 42

Pegeia Municipality 101 161 2 0 0 264

Polis Municipality 16 5 0 0 0 21

Rural 127 147 5 0 0 279

Total 1.165


Famagusta District Flats Houses Shops Offices

Industrial /

Light

Industrial

Totals

Agia Napa Municipality 29 6 2 2 0 39

Deryneias Municipality 28 19 0 0 0 47

Paralimni Municipality 127 60 1 0 0 188

Sotiras Municipality 1 9 0 0 0 10

Rural 7 4 0 0 0 11

Total 295


Buildings Non - Horizontally Divided:

Nicosia District

Houses /

Detached/Semid

etached/Row

Houses

Shops Offices

Industrial /

Light

Industrial

Totals

Nicosia Municipality 21 3 1 1 26

Agios Dometios Municipality 3 0 0 0 3

Aglantzia Municipality 4 0 0 0 4

Geri Municipality 12 1 1 0 14

Egkomi Municipality 9 0 0 1 10

Dali Municipality 31 0 0 2 33

Lakatamia Municipality 42 0 1 0 43

Latsia Municipality 6 0 0 0 6

Strovolos Municipality 21 1 1 0 23

Tseri Municipality 9 0 1 2 12

Rural 84 4 0 0 88

Total 262

Sale Units Non - Horizontally Divided 01.01.2012 -31.07.2013


Limassol District

Houses /

Detached/S

emidetache

d/Row

Houses

Shops Offices

Industrial /

Light

Industrial

Totals

Limassol Municipality 37 2 0 0 39

Agios Athanasios Municipality 23 0 0 0 23

Germasogia Municipality 13 0 0 0 13

Kato Polemidia Municipality 2 0 0 0 2

Mesa Geitonia Municipality 4 0 0 0 4

Ypsonas Municipality 44 2 0 0 46

Rural 189 1 0 0 190

317


Larnaca District

Houses /

Detached/S

emidetache

d/Row

Houses

Shops Offices

Industrial /

Light

Industrial

Totals

Larnaca Municipality 3 1 0 0 4

Athienou Municipality 0 0 0 0 0

Aradippou Municipality 4 1 0 0 5

Dromolaxia -Meneou Municipality 0 0 0 0 0

Livadia Municipality 0 0 0 0 0

Pano Lefkara Municipality 0 0 0 0 0

Rural 2 0 0 0 2

Total 11


Paphos District

Houses /

Detached/Se

midetached/

Row Houses

Shops Offices

Industrial /

Light

Industrial

Totals

Paphos Municipality 3 0 0 0 3

Geroskipou Municipality 2 0 0 0 2

Pegeia Municipality 42 0 0 0 42

Polis Municipality 1 0 0 0 1

Rural 109 1 0 0 110

Total 158


Famagusta District

Houses /

Detached/Semi

detached/Row

Houses

Shops Offices

Industrial /

Light

Industrial

Totals

Agia Napa Municipality 5 0 0 0 5

Deryneias Municipality 3 0 0 0 3

Paralimni Municipality 24 2 0 0 26

Sotiras Municipality 3 0 0 0 3

Rural 21 0 0 0 21Total 58



2.2 Collection and Preparation of sales data

i) Brief description of the process of transfer and record of sales or contract of sales

The Department of Lands and Surveys is the authority responsible for the transfer and

registration of all immovable properties in Cyprus. The data that has been used for statistical

analysis are sale transactions that are recorded daily at the District Lands Offices. The record of

every sale is processed and recorded through the Land Information System (LIS). The main

information collected in every sales file is kept at the date of the transfer is the following:

Sales file and date

Declared Sales File

Accepted Sales File Sales analysis indicator; (code 1: D=C without LI, code 2 D≠C without LI, code 3 D≠C with LI,

code 4 D≠C with LI and court decision).

Contract of sales file and date

Identification of the Property

Seller and Buyer

Planning zone and category

Property Type

Remarks

The seller and the buyer appear at the District Lands Office at the date of the transfer and the

transfer is made on the same date. The seller and the buyer under the existing law, declare the

agreed value of the property and the Department is charging the relevant transfer fees on that

amount. An authorized valuer at the date of the transfer is evaluating every sale transaction,

whether the declared sales price is equal to the market value. This is based on the existing

legislation. If the declared value does not equal to the market value at the date of the transfer an

authorized valuer proceeds with a new valuation that is considered to be the true market value of

the property based on comparable sales in the neighborhood. The buyer has to pay transfer fees

on the estimated market value, otherwise an objection may be made within 45 days by providing

a valuation report on the true market value. The District Lands Office Valuer will assess the

evidence of the private valuation and if needed, he will proceed with a local inspection of the

property. The decision is communicated to the buyer within 3 months. If the buyer disagrees

with the decision of the DLO Valuer, then he/she can apply to the Supreme Court for the

determination of the market value under Section 80 of the Immovable Property Law (tenure,

registration and valuation) Cap. 224. When the declared value equals the accepted sale price in

the LIS, the sales analysis indicator automatically shows the code 1, which means “genuine

sale”. Where the parties agree to sign a contract of sale instead of directly proceeding to the

transfer usually the unit is under construction and there is no title for the unit, although there are

cases where the parties agree to a contract of sale even with the existence of a title. In such a

case and for valuation purposes the crucial date is the contract of sales date and not the transfer

date.

The existing process of transfer does not provide for the recording of the property characteristics,

other than the basic sales information noted above. On the other hand, the valuer takes into

consideration the available data within the Department as well as gathering information by

questioning the seller/buyer to declare or inform the Department as regards the general

characteristics of the property. A new process has been finalized and a circular will be issued so

that at the date of the sale all available property characteristics will be filled into a specific form

(questionnaire form) by the seller/buyer at the date of the transfer. The parties involved into the


transfer process will have to submit this form together with the application form for the transfer

of the property.

In order to be able to analyze sale transactions, information has been exported from the LIS for

the following categories of properties:

ii. Sale Transactions of Land (vacant)

Sale transactions were extracted from LIS between 01.01.2008 to 16.10.2014. This includes

fields and building sites (serviced land) in all districts. Because there was no information for the

basic characteristics of land (accessibility code, road side relation and shape) at the date of the

sale, this information was matched with the characteristics of land which have been mass

updated through GIS for the purpose of the general valuation of the Island. The information is

accurate and reliable for analysis as the matching was only possible, if a common identification

of the two separate files exist.

The initial number of land sale transactions extracted per district is shown below:

VACANT LAND (JUN. 2008 - OCT. 2014 )

DISTRICT

Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Total

NICOSIA 609 782 8 2 0 0 94 58 199 2.200 53 877 963 3.919 4.882

LIMASSOL 89 519 10 3 2 16 8 7 44 644 41 600 194 1789 1.983

LARNACA 162 172 1 0 0 41 43 5 262 312 147 256 615 786 1.401

PAPHOS 39 205 1 3 13 22 0 14 37 559 19 398 109 1201 1.310

FAMAGUSTA 182 32 8 0 141 4 16 0 240 138 99 83 686 257 943

TOTAL 1.081 1.710 28 8 156 83 161 84 782 3.853 359 2.214 2.567 7.952 10.519

DISTRICT


NICOSIA 712 153 35 0 0 0 6 10 4 10 1 6 758 179 937

LIMASSOL 597 628 47 6 7 37 17 0 0 3 13 12 681 686 1.367

LARNACA 406 323 19 1 0 24 1 1 0 6 1 2 427 357 784

PAPHOS 155 233 14 1 6 0 0 7 0 259 3 21 178 521 699

FAMAGUSTA 84 16 3 0 3 0 0 0 0 2 0 0 90 18 108

TOTAL 1.954 1.353 118 8 16 61 24 18 4 280 18 41 2.134 1.761 3.895

FIELDS

BUILDING SITES

TOTALRESIDENTIAL COMMERCIAL TOURISTIC INDUSTRIAL AGRICULTURAL OTHER

TOTALRESIDENTIAL COMMERCIAL TOURISTIC INDUSTRIAL AGRICULTURAL OTHER

iii. Sale Transactions of Buildings (non-horizontally divided units)

Building sale transactions are usually single storey houses, semidetached houses and industrial

and light industrial buildings. Because of the difficulty to export the fiscal characteristics of the

building as well as the entity itself, the approach was first to extract all the sales file information.

Thereafter, employees of the Valuation Section in each District have searched through each

separate sales record and have noted and matched the basic characteristics of the building (year

built, refurbishment year, category/class, condition and view) with the excel export sales file.

This task was initiated in December 2013 in order to have sales information of buildings for

statistical analysis as well as to be used for the implementation of the new General Valuation on

01.01.2013. The sales information gathered covers the period between 01.01.2008 to

31.07.2013.

The initial number of sale transaction of buildings non-horizontally divided per district is shown

below:


DISTRICT


NICOSIA 1.044 450 19 2 0 0 0 0 1 19 14 3 1.078 474 1552

LIMASSOL 653 854 15 5 5 0 0 0 1 36 9 15 683 910 1593

LARNACA 74 4 4 0 0 0 0 0 0 0 2 0 80 4 84

PAPHOS 117 320 4 12 5 2 0 0 11 25 8 35 145 394 539

FAMAGUSTA 58 40 5 0 64 0 0 0 8 8 10 2 145 50 195

TOTAL 1.946 1.668 47 19 74 2 0 0 21 88 43 55 2.131 1.832 3.963

OTHER TOTAL

UNITS (Non horizontally divided e.g houses)

RESIDENTIAL COMMERCIAL TOURISTIC INDUSTRIAL AGRICULTURAL

iv. Sale Transactions of Units horizontally divided

These are units which are horizontally divided within a large block. The most common ones are

flats, shops and offices while sometimes it is possible to observe single houses divided

horizontally in a large piece of land in touristic areas. These have a separate certificate of

registration and they own a common percent in land in relation to the size and value of the unit

they hold. The sales information of these units was possible to be exported directly from LIS. It

actually matched the information data captured (property characteristics) for every unit for

general valuation purposes with the sales file. This sales data set covers the period between

01.01.2008 to 30.09.2014.

The initial number of sale transactions of units per district is shown below:

UNITS Horizonatlly Divided (JUN. 2008 -SEPT. 2014 )

DISTRICT


NICOSIA 3.221 29 375 0 0 0 1 0 0 0 136 0 3.733 29 3.762

LIMASSOL 1.879 76 428 106 287 258 0 0 0 0 150 0 2.744 440 3.184

LARNACA 1.494 411 169 6 17 103 0 0 0 0 80 0 1.766 520 2.286

PAPHOS 1.213 199 107 3 149 7 0 0 0 0 27 30 1.496 239 1.735

FAMAGUSTA 283 12 40 0 86 0 0 0 1 0 125 0 535 12 547

TOTAL 8.090 727 1.119 115 539 368 1 0 1 0 518 30 10.274 1.240 11.514

OTHER TOTAL

UNITS HORIZONTALLY DIVIDED (e.g flats)

RESIDENTIAL COMMERCIAL TOURIST INDUSTRIAL AGRICULTURAL

2.3 Matching of Appraisal and Market Data

The properties selected for the study were ones with physical, legal and economic characteristics

as at 01.01.2013, which were also sold either one year before or after the general valuation date.

The properties are considered to have the same property characteristics for the purpose of this

study. In case where inconsistency was identified, these properties were excluded from the

samples.

2.4 Sampling and Limitations of Sales

To determine the accuracy of appraisals with a good level of certainty, all properties in the

population are filtered so that only those which have been sold in an arm’s-length transaction and

nearest to the appraisal date are selected. For the purpose of this study, no transactions were

included in the samples which were considered as transfers by gift. On the other hand,

properties which were sold as shared were adjusted as being whole share in order to maintain an

adequate level of samples for this analysis. Also, in cases where the ratio was too low or too

high, mainly due to different physical or legal characteristics for same property, these were also

excluded from the ratio study. These outliers will be further investigated in order to identify the


main cause of difference and to take the necessary action to correct these values, if possible.

Furthermore the following properties were excluded from the analysis:

Properties that fall into one planning zone, but two or more different building uses

(commercial and residential) exist on the plot.

Properties that fall into two planning zones.

For a number of sales, the actual properties today are historical and do not exist in the system,

thus these were also excluded from the study.

Very large properties or specialized properties (i.e golfs, power stations) that rarely sold.

Leasehold interests, although any such property was valued on a vacant possession basis.

Other problems associated with the ratio study are properties sold which are located near the

buffer zone, an area which physically separates the Government Controlled Area from the

occupied area of Cyprus. This is due to the Turkish invasion and occupation of 34% of the

territory of Cyprus since 1974. This has greatly affected the property market and especially

municipal and communal authorities which are in close proximity to the buffer zone. In the

recent general valuation, no adjustment was taken for this attribute other than the planning zone

consideration and therefore this is already under investigation by district valuers.

2.5 Period of sales used and Time Adjustment

As already noted, the periods for which sales have been selected are one year before and one

year after 01.01.2013. The sales were not time adjusted. The IAAO standard1 suggests that the

period of sales to be selected should be as close as possible to the crucial date. Furthermore, the

standard suggests that, provided that there are no significant economic shifts or changes to

property characteristics, if a longer period may be required to produce representative sample,

then these should be time adjusted. The first signs of economic recession especially in the

property market were observed from Q.3, 2008 and thereafter prices continue to fall according to

the Residential Property Price Index published by the Central Bank of Cyprus (CBC). The CBC

PPI in Q3 of 2008 was at point 107,3 and in Q3 of 2014 dropped to 75,07 (about 30% total

drop). A very similar trend is also recorded by the RICS Cyprus Property Index, which is also

published on a quarterly basis. Both indices are attached in appendix B and C, respectively.

It should be noted that at present, the only property index available that can be used for time

adjustment for houses and flats (no other type of index in available i.e. commercial index) at

district level, is that of the CBC Residential Property Index. There is no land index available by

the CBC, but DLS has been informed that an unofficial Land Index will be available by CBC in

February 2015.

Therefore, it was decided to use only the one year’s sales before and after the crucial date for the

purpose of this study bearing in mind the abnormal economic conditions on the island and in

order to achieve a better uniformity the closer the sales date to the GV date. Another point for

consideration was that although units including land value could be adjusted by the index, this

was not possible for vacant land in the absence of any land index.

1 Standard on Ratio Studies (April 2013)


2.6 Data Accuracy and Integrity

The findings of a ratio study can only be as accurate as the respective quality of data used in the

study. The recent GV could have been more accurate, if adequate information about the property

market was available to explain and support the level of values in each geographical area and

property type. This will depend on the accuracy and availability of sales data, the

representativeness and the quality of the data. The variation of the ratio (A/S), is dependent

upon the quality of the information used in the analysis.

3. Inherent Limitations of the Ratio Study

3.1 Limited number of sales

A ratio study cannot provide perfect information about appraisal performance. Lack of sufficient

sales, outliers, or overrepresentation of one geographic area or type of property can distort

results. The sale transactions have been at the minimum since 2008, and thus the number of

samples has been reduced considerably. Two charts are shown below. The first one represents

the yearly sale data trends by district 2008 – 2014 (Nov.). The second chart is the national

yearly sales data from 2008 to 2014 (Nov.), which shows a total decrease of 56,63% (10.513

sales).

18.564

11.444

13.701

12.279

11.424

8.6098.051

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

2008 2009 2010 2011 2012 2013 2014

No

. of S

ales

NATIONAL YEARLY SALES DATA TREND

Expon. ()


3.2 Outlier Ratios

Outlier ratios can be very low or very high in comparison to the expected median ratio, which

should be between 0,90 to 1,10. Other statistical measures can also be affected by these outliers

like the Coefficient of Dispersion (COD) and the Price Related Differential (PRD) and thus

trimming may be required.

For this reason, the DLS Senior Valuation Officer in cooperation with each Approval Valuation

Officers have been provided with the number of outliers that have been identified during this

ratio study is order to explain the reasoning behind these outliers. This investigation was made

in each district for the three major groups of properties, namely, i) vacant land ii) horizontally

divided units and iii) Non- horizontally divided units. The results of this analysis are presented

below:

3.2.1 Nicosia District – Comments on Outliers

Vacant land

The property with registration 1/427/0/0/6369 is a field and the sale price was much below the

recent G.V. The subject matter of the sale transaction concerned a share (1/12), while the total

number of co-owners is 11. It is common in practice to exclude sales transactions with multiple

shares because usually they do not represent the true market value.

The property with registration 1/23/1/4/437 is a field. The property at the date of the sale was

designated as agricultural and at the date of the recent G.V, the planning zone was upgraded into

a special use zone.

Furthermore, during the ratio analysis for rural land it was found that some ratio values were too

high. A histogram has been prepared only in this case and the outliers are presented below. It

can be seen from the graph that the histogram is rightly skewed.


After investigation of these properties, the ratio of the outlier was 14,49 and the reason was that

at the date of the mass appraisal the property was in an agricultural planning zone, while the

same property when sold was in livestock planning zone.

In another case, the ratio of the outlier was 9,46 and the reason was that the property was within

the buffer zone and it was held in multiple shares.

Horizontally divided units

A shop with registration number 1/0/5/3/1301 was sold on 27.02.2009. After investigation, this

property is a semi basement located at the end of the arcade. The property was overvalued in the

recent G.V and will be investigated further.

In another sale which consists of four shops with separate registrations and they are all subject to

a life interest. The recent GV has overvalued these properties because these factors cannot be

taken into consideration. Under the existing GV law, all properties are valued with vacant

possession.

Non horizontally divided units

Another sale transaction consists of one plot and one house. At a later stage, a second house was

erected on the same plot and thus the recent GV was inconsistent with the sale transaction.

In another case, the year built of a two storey building was initially recorded 1935 and at a later

stage it was fully renovated in 1980. For some reason, the year of renovation was not recorded

into CILIS and thus the recent GV was much lower than the sale price.


3.2.2 Limassol District - Comments on Outliers

Vacant land

Another property is a strip of land and the development potential is very limited. In the recent

GV, although an adjustment was performed in the system, this was not adequate. Therefore, the

assessment is much higher than the sale price.

The sale price of a number of building sites that have been dedicated for the low income earners

have been recorded in the DLS at a nominal value, thus the recent GV is greater than this value.


A number of tourist flats/houses built in a very large sea front plot have been overvalued in the

recent GV. The reason is that these buildings are located in a secondary position within the plot

and this attribute was not recorded into the CILIS.


The year built of a house was not recorded into the CILIS and therefore in the recent GV it was

considered as new and as a consequence the ratio was high.

At a local inspection a house of 256 sq.m was standing on a plot, but this was not recorded into

CILIS. The assessment ratio was very low.

3.2.3 Larnaca District - Comments on Outliers

Vacant land

A property was identified to be a strip of land and its development potential was very limited. In

the recent GV, although an adjustment was performed in the system, this was not adequate.

Therefore, the assessment is much higher than the sale price.


In a property (id. 4/102/2/2/10917), the transferor in the sale transaction was a family company

and the transferee a shareholder of the same company. In this case, the transfer fees are based on

1980 prices and are not considered as a market value transaction. This transaction should have

been excluded from the sample.

In another case the transferred property (id. 4/14/2/0/3750) was subject to a life interest and thus

this should have been excluded from the sample.

Another property with registration 4/0/2/8/741, is a shop and is located in a non-commercial

planning zone. After investigation, the property was found to be a semi basement shop.


No ratio study was performed for this type of properties due to very limited observations for the

period between 01.01.2012 and 31.12.2013.


3.2.4 Famagusta District - Comments on Outliers

Vacant land

Two properties which were located within the Sovereign Base Areas (SBA) were overvalued in

the recent GV as compared with their respective sale prices. Properties located in the SBA are

usually sold below market value compared with the properties without this restriction. The DLS

is investigating and analyzing these geographical areas in order to define new micro locations.

Furthermore, properties located within the foreshore protection zone have been overvalued in the

recent GV for the reason that this characteristic was not recorded into the CILIS.


A number of tourist flats/houses built in a very large sea front plot have been overvalued in the

recent GV. The reason is that these buildings are located in a secondary position within the plot

and this attribute was not recorded into the CILIS.


A small number of buildings were not created into the CILIS and thus the recent GV was

underestimated as compared with the sale price.

In some circumstances, the buildings were erected into two plots, while in the CILIS these were

created in one plot. In these cases, the recent GV of these plots were either overvalued or

undervalued, accordingly. The problem can only be solved after the amalgamation of the

plots.

3.2.5 Paphos District - Comments on Outliers

Vacant land

A property is a strip of land with limited development potential. It was overvalued in the recent

GV.


The common percentage on land attributable to the flat was wrong, thus the property was

overvalued in the recent GV.


A number of properties have been designated into two planning zones. The existing CILIS can

only take into consideration the primary zone for valuation. As a result, in the recent GV these

properties were either under or overvalued.

The aforementioned outliers described in each district have already been identified by the DLS

Valuers and directions have been given at district level to reassess areas which show abnormal


high or low ratios. Furthermore, these and other geographical areas are investigated after

owners’ objections.

4. Sample Representativeness

In general a ratio study is valid to the extent that the sample is sufficiently representative of the

population. By definition a ratio study sample would be representative when the distribution of

ratios of the properties in the sample reflects the distribution of ratios of properties in the

population. In our case, the maximum available number of sales after filtering were selected for

this study in order to have the best possible representativeness bearing in mind the constrains of

the current economic environment and the dramatic decrease of sale transactions.

In this study, similar properties were grouped into one category so as the data is homogeneous

for analysis purpose. The two most common property attributes that have been used to

categorize the properties are the property type and the planning use.

In addition to the sales data, asking prices or independent appraisal samples or a combination

could have been used, but these were excluded from this study for the reason that asking prices

are not a reliable indicator, especially during this time of economic crisis where the property

market is under distress. As regards independent appraisals that are performed by the DLS, these

have been decreased considerably. The majority of the appraisals within the department are

performed to meet statutory provisions like compulsory purchase, exchange of government with

private land, planning compensation cases and other advisory valuation to other government

departments.

5. Ratio Study Statistics and Analysis

The SPSS package was applied to perform various statistical analyses for the purpose of this

study.

5.1 Measure of Appraisal Level

The appraisal level is based on measures of central tendency. The statistical output includes the

measures of mean ratio, median ratio and weighted mean ratio. The result of any of the

aforementioned measures is a point estimate, which is accurate for the sample, but is only one

indicator of the level of appraisal in the population. The median indicator is a preferred measure

of central tendency for evaluating appraisal performance. The mean indicator maybe is affected

by extreme ratios and can be relied upon if adequate number of observations exists.

5.2 Measure of Variability (Appraisal Uniformity)

Measures of dispersion or variability relate to the uniformity of the ratios. In principle, the

smaller the measure, the better the uniformity.

In practice, very low measures could indicate that properties are homogenous or the market is

very stable or both, whereas high measures could indicate lack of quality control, calculation

errors, poor sample representativeness or even sales chasing.


5.2.1 Coefficient of Dispersion

This is the most general measure of variability or uniformity. It measures the average percentage

deviation of the ratios from the median ratio. The following steps should be taken to calculate

the COD:

i. Subtract median from each ratio

ii. Take the absolute value of the calculated difference

iii. Sum the absolute differences

iv. Divide by the number of ratios to obtain the average absolute deviation

v. Divide by the median

vi. Multiply by 100

The International Association of Assessing Officers (IAAO) standard on ratio studies (April

2013), provides the following guidance for the COD:

General Property Class Jurisdiction Size/Profile/Market Activity COD Range

Very large jurisdictions/densely populated/newer properties/active markets <=10%

Large to mid-sized jurisdictions/older & newer properties/less active markets <=15%

Rural or small jurisdictions/older properties/depressed market areas <=20%

Very large jurisdictions/densely populated/newer properties/active markets <=15%

Large to mid-sized jurisdictions/older & newer properties/less active markets <=20%

Rural or small jurisdictions/older properties/depressed market areas <=25%

Very large jurisdictions/rapid development/active markets <=15%

Large to mid-sized jurisdictions/slower development/less active markets <=20%

Rural or small jurisdictions/little developments/depressed market <=25%

Very large jurisdictions/rapid development/active markets <=20%

Large to mid-sized jurisdictions/slower development/less active markets <=25%

Rural or small jurisdictions/little development/depressed market <=30%

Residential improved (single family

dwellings, condominiums, manuf.

housing, 2-4 family units)

Income-producing properties

(commercial, industrial,

appartments)

Residential vacant land

Other (non-agricultural) vacant

land)

Note: These types of properties are provided for general guidance only and may not jurisdictional requirements.

The COD performance recommendations are based upon representative and adequate sample sizes, with

outliers trimmed and a 95% level on confidence.

COD below 5% may indicate sales chasing or non-representative sample.

5.2.2 Other measures of variability

Other measures of variability have also been performed in the ratio study by SPSS and are

shown in Appendix - A. These are the following:

Range

Coefficient of variation (cov)

Standard deviation

5.3 Measure of Reliability

This measure concerns the degree of confidence that can be placed in a calculated statistic for a

sample. On the other hand, this does not mean that an appraiser should tolerate measure of

central tendency that fail to meet targets whenever measures of reliability are wide due to small

samples, poor uniformity or both. In our case, we experience a limited number of observations

and thus this measure may not be so meaningful and may not represent the actual accuracy of the

mass appraisal results.

The confidence interval is of primary importance and has a lower and higher bound that bracket

a calculated measure of central tendency for a sample.


5.4 Vertical Inequity

This is a measure of the systematic differences in the appraisal of low and high value properties

from the market value and the index statistic for this is the “Price Related Differential” (PRD).

The PRD is calculated by the formulae:

When low-value properties are appraised at greater percentages of market value than high-value

properties, assessment regressivity is indicated. In contrast, when low-value properties are

appraised at smaller percentages of market value, than high value properties, assessment

progressivity is indicated. Further, when high-value properties are over appraised at greater

percentages of the market value than low- value properties, assessment progressivity is indicated.

On the other hand, when high-value properties are under appraised at greater percentages of the

market value than low- value properties, assessment regressivity is indicated.

The interpretation of the results of above paragraph is explained below in a summary table.

PRD Interpretation Favour Type of

valuation bias

0,98 to

1,03

Low- and high- value properties are

appraised equally.

Neither None

<0,98 High value properties are over

appraised

Low value properties progressive

>1,03 High value properties are under

appraised

High value

properties

regressive

<0,98 Low value properties are over

appraised

High value

properties

progressive

>1,03 Low value properties are under

appraised

Low value properties regressive


6. Ratio Study Results

The ratio studies were conducted by district, geographical area (Municipality, Rural areas-

communal authorities) and property type using the SPSS software package. All detailed outputs

are presented in appendix - A, while a summary of those is presented below:

6.1 Nicosia District

Nicosia District Type of propertyNo. of

observ.

Mean

Ratio

Median

Ratio

(IAAO Standard) 0,9 <= M.R=<1,1

COD

IAAO

Standard

COD

PRD

(IAAO

Standard) 0,98 <=PRD =< 1,03

Nicosia Municipality Residential Fields 5 1,42 1,49 0,28 0,25 1,21

Aglantzia Municipality Residential Fields 10 0,95 1,11 0,55 0,25 1,39Geri Municipality Residential Fields 11 0,99 0,96 0,39 0,25 1,57Dali Municipality Residential Fields 7 0,80 0,78 0,27 0,25 1,31Lakatamia Municipality Residential Fields 4 0,91 0,87 0,15 0,25 1,08

Strovolos Municipality Residential Fields 4 0,66 0,56 0,20 0,25 1,12

Tseri Municipality Residential Fields 6 0,86 0,73 0,18 0,25 1,07

Rural Areas Residential Fields 66 0,80 0,69 0,47 0,25 1,09

Nicosia Municipality Residential Building sites 14 1,06 1,00 0,16 0,20 1,09

Aglantzia Municipality Residential Building sites 14 0,98 0,95 0,29 0,20 1,05

Geri Municipality Residential Building sites 29 0,99 1,00 0,15 0,20 1,06

Egkomi Municipality Residential Building sites 21 0,91 0,87 0,17 0,20 1,02

Dali Municipality Residential Building sites 43 0,79 0,82 0,16 0,20 1,06

Lakatamia Municipality Residential Building sites 71 0,91 0,91 0,12 0,20 1,03

Latsia Municipality Residential Building sites 17 0,90 0,87 0,11 0,20 1,01

Strovolos Municipality Residential Building sites 44 0,99 0,93 0,15 0,20 1,03

Tseri Municipality Residential Building sites 25 0,90 0,89 0,21 0,20 1,05Rural Areas Residential Building sites 88 0,82 0,84 0,18 0,20 1,03

Nicosia Municipality Flats Horizontally divided 346 0,81 0,76 0,20 0,20 1,04

Nicosia Municipality Shops Horizontally divided 14 0,97 0,88 0,35 0,20 1,11

Nicosia Municipality Offices Horizontally divided 18 1,29 1,31 0,21 0,20 1,06

Ag. Dometios Municipality Flats Horizontally divided 49 0,76 0,70 0,17 0,20 1,02

Aglantzia Municipality Flats Horizontally divided 116 0,86 0,85 0,15 0,20 1,05

Geri Municipality Flats Horizontally divided 18 0,79 0,76 0,09 0,20 1,00

Egkomi Municipality Flats Horizontally divided 84 0,80 0,76 0,18 0,20 1,05

Dali Municipality Flats Horizontally divided 21 0,81 0,80 0,12 0,20 1,01

Lakatamia Municipality Flats Horizontally divided 237 0,77 0,75 0,14 0,20 1,02

Latsia Municipality Flats Horizontally divided 132 0,74 0,72 0,13 0,20 1,01

Strovolos Municipality Flats Horizontally divided 310 0,84 0,80 0,17 0,20 1,05

Strovolos Municipality Houses Horizontally divided 4 0,85 0,83 0,10 0,20 0,99

Strovolos Municipality Shops Horizontally divided 6 1,03 1,08 0,26 0,20 1,08

Strovolos Municipality Offices Horizontally divided 6 0,89 0,95 0,15 0,20 1,03

Tseri Municipality Flats Horizontally divided 19 0,67 0,67 0,08 0,20 1,00Rural Flats Horizontally divided 19 0,81 0,81 0,20 0,20 1,04

Nicosia Municipality Houses Non Horiz. divided 14 0,88 0,93 0,20 0,15 1,10

Geri Municipality Houses Non Horiz. divided 6 0,81 0,80 0,24 0,15 1,08

Egkomi Municipality Houses Non Horiz. divided 9 1,03 1,10 0,15 0,15 1,11

Dali Municipality Houses Non Horiz. divided 17 0,89 0,92 0,14 0,15 1,23

Lakatamia Municipality Houses Non Horiz. divided 33 0,85 0,82 0,17 0,15 1,05

Latsia Municipality Houses Non Horiz. divided 5 0,94 0,84 0,14 0,15 1,06

Strovolos Municipality Houses Non Horiz. divided 16 0,89 0,83 0,17 0,15 1,13Rural Houses Non Horiz. divided 54 0,87 0,86 0,20 0,20 1,06


6.1.1 Evaluation of the Nicosia District Ratios

Residential Fields

Due to the very limited number of sales it was very difficult to arrive at sound results, both for

the municipalities as well as for the rural areas. The overall median ratio is below standard.

About 50% of the municipalities are within the COD standard. For the rural areas the COD is

not within the standard. As regards the PRD indicator for municipalities and rural areas, the

results are over the standard (<1,03), which depict regressivity in values.

Residential Building Sites

The number of observations is higher than those of residential fields. About 89% of the

municipality median ratios are within the limits, while the remaining is very close to the limits.

If time adjustment was to be applied in the sales, the majority of the ratio will fall within the

limits. About 77% of the observations fall within the COD standard. As regards the PRD about

44% fall within the standard. The PRD indicator shows regressivity in the observations.

As regards the rural areas, the median ratio is below but close to the limits (0,84 instead of 0,9),

while the COD and PRD are within the limits.

Units horizontally divided

In some municipalities the observations for the flats are very low. About 10% of the

municipality ratios are within the limits for flats, while the remaining are close to the limits.

Further investigation is needed. All the observations for flats fall within the COD standard. As

regards the PRD about 64% fall within the standard. The PRD indicator shows regressivity in

the observations.

Only in Nicosia and Strovolos municipalities we have observations for shops/offices which are

extremely low (Nic=32, Strovolos =12). About 75% of the units of the two municipalities fall

within the median ratio limits. As regards the COD about 25% of the units fall within the

standard limits and the 50% is very close to the limits. As regards the PRD indicator, only 25%

fall within the standard limits.

As regards the rural areas, the median ratio is below but close to the limits (0,81 instead of 0,9),

while the COD indicator is within the limits. The PRD indicator is very close to the limits.

Units Non - horizontally divided

The number of observation in the municipalities is very low. About 43% of the municipality

ratios are within the limits for houses, while the remaining are very close to the limits. About

43% of the observations for houses fall within the COD standard, while about 25% are very

close to the limits. As regards the PRD indicator, the observations fall outside the limits. The

PRD indicator shows regressivity in the observations.

As regards the rural areas, the median ratio is within the standard limits as well as the COD

indicator. PRD indicator is outside the standard limits and shows regressivity in the

observations.


6.2 Limassol District

Limassol District Type of propertyNo. of

observ.

Mean

Ratio

Median

Ratio

(IAAO

Standard) 0,9

<= M.R=<1,1

COD

IAAO

Standard

COD

PRD

(IAAO

Standard) 0,98 <=PRD =< 1,03

Germasogia Municipality Residential Fields 10 0,82 0,76 0,24 0,25 0,99

Ypsonas Municipality Residential Fields 3 0,95 0,85 0,22 0,25 1,02

Rural Areas Residential Fields 94 0,83 0,70 0,29 0,25 1,03Rural Areas Touristic Fields 5 0,78 0,76 0,12 0,25 1,00

Limassol Municipality Residential Building sites 33 1,01 0,97 0,16 0,20 1,04

Agios Athanasios Municipality Residential Building sites 39 1,00 1,00 0,14 0,20 1,09

Germasogia Municipality Residential Building sites 45 1,06 1,05 0,20 0,20 1,04

Kato Polemidia Municipality Residential Building sites 7 0,82 0,77 0,19 0,20 1,05

Mesa Geitonia Municipality Residential Building sites 5 0,75 0,67 0,16 0,20 1,02

Ypsonas Municipality Residential Building sites 22 0,87 0,92 0,16 0,20 1,09Rural Areas Residential Building sites 150 0,90 0,92 0,18 0,20 1,03

Limassol Municipality Flats Horizontally divided 557 0,77 0,73 0,17 0,20 1,04

Limassol Municipality Houses Horizontally divided 12 1,12 1,06 0,26 0,20 1,10

Limassol Municipality Shops Horizontally divided 22 1,03 1,10 0,26 0,20 1,03

Limassol Municipality Offices Horizontally divided 20 0,70 0,66 0,20 0,20 1,10

Agios Athanasios Municipality Flats Horizontally divided 70 0,69 0,70 0,18 0,20 1,03

Agios Athanasios Municipality Houses Horizontally divided 12 0,80 0,79 0,23 0,20 1,02

Germasogia Municipality Flats Horizontally divided 170 0,74 0,71 0,20 0,20 1,03

Germasogia Municipality Houses Horizontally divided 47 0,82 0,83 0,19 0,20 1,08

Germasogia Municipality Shops Horizontally divided 3 0,84 0,65 0,32 0,20 1,20

Kato Polemidia Municipality Flats Horizontally divided 84 0,68 0,67 0,13 0,20 1,02

Mesa Geitonia Municipality Flats Horizontally divided 51 0,75 0,75 0,13 0,20 1,02

Ypsonas Municipality Flats Horizontally divided 27 0,69 0,68 0,11 0,20 1,02

Ypsonas Municipality Houses Horizontally divided 5 0,92 0,85 0,14 0,20 1,02

Rural Areas Flats Horizontally divided 140 0,91 0,87 0,22 0,20 1,05

Rural Areas Houses Horizontally divided 85 0,92 0,90 0,16 0,20 1,05Rural Areas Shops Horizontally divided 5 1,16 0,78 0,57 0,20 1,30

Limassol Municipality Houses Non Horizontally divided 31 1,00 0,95 0,20 0,15 1,03

Agios Athanasios Municipality Houses Non Horizontally divided 14 0,83 0,83 0,22 0,15 1,17

Germasogia Municipality Houses Non Horizontally divided 11 0,84 0,77 0,20 0,15 1,06

Ypsonas Municipality Houses Non Horizontally divided 35 0,78 0,86 0,34 0,20 1,56Rural Areas Houses Non Horizontally divided 145 0,88 0,82 0,31 0,20 1,02

6.2.1 Comments on Limassol District Ratios

Residential Fields


the municipalities as well as for the rural areas. About 50% of the median ratio falls within the

standard. As regards the COD and PRD indicators all observations in the municipalities fall

within the standard.

As regards the rural areas, the median ratio is below the limits. The COD indicator is close to

the standard limits (0,29 instead of 0,25). The PRD indicator is within the limits.



municipality median ratios are within the limits. All the observations fall within the COD

standard. As regards the PRD about 17% fall within the standard. The PRD indicator shows

regressivity in the observations.


In the rural areas, the median ratio, the COD and PRD indicators are all within the limits.



municipality ratios are within the limits for flats. Further investigation is needed. As regards the

the COD indicator, about 80% fall within the standard limits and the remaining are very close.

The PRD indicator is good as about 70% fall within the standard limits.

Only in Limassol and Germasoyia municipalities we have observations for shops/offices which

are relatively low. About 33% of the units of the two municipalities fall within the median ratio

limits. As regards the COD about 33% of the units fall within the standard limits. In respect of

the PRD indicator, only 33% fall within the standard limits.

Regarding the rural areas, all the observations fall within the median ratio standards. In respect

to the COD indicator about 50% falls is within the limits, while the remaining 50% is very close

to it. Concerning the PRD indicator, it is very close to the limits (1,05 instead of 1,03, which is

the upper limit).


The number of observations in the municipalities is very low. About 50% of the municipality

ratios are within the limits for houses. The COD indicator falls outside the standard limits.

Further investigation is needed. In respect of the PRD indicator, about 25% of the observations

for houses fall within the PRD standard. The PRD indicator shows regressivity in the

observations.

In respect of the rural areas, the median ratio and the COD are outside the standard limits.

Further investigation is needed. The PRD indicator falls within the standard limits.

6.3 Larnaca District

Larnaca District Type of propertyNo. of

observ.

Mean

Ratio

Median

Ratio

(IAAO

Standard) 0,9 <= M.R=<1,1

COD

IAAO

Standard

COD

PRD

(IAAO

Standard) 0,98 <=PRD =<

1,03

Aradippou Municipality Residential Fields 16 1,09 1,06 0,26 0,25 1,15


Rural Areas Touristic Fields 19 1,18 1,00 0,50 0,25 1,05

Larnaca Municipality Residential Building sites 29 0,96 0,93 0,22 0,20 1,06

Aradippou Municipality Residential Building sites 63 0,91 0,88 0,19 0,20 1,05

Dromolaxia -Meneou Municipality Residential Building sites 8 0,87 0,79 0,18 0,20 1,04

Livadia Municipality Residential Building sites 17 0,88 0,90 0,17 0,20 1,03

Rural Areas Residential Building sites 87 0,93 0,94 0,22 0,20 1,03

Rural Areas Touristic Building sites 5 0,87 0,74 0,28 0,20 0,73

Larnaca Municipality Flats Horizontally divided 402 0,90 0,88 0,20 0,20 1,07

Larnaca Municipality Shops Horizontally divided 20 1,10 1,21 0,17 0,20 1,11

Larnaca Municipality Offices Horizontally divided 11 1,01 1,00 0,13 0,20 1,04

Aradippou Municipality Flats Horizontally divided 109 0,78 0,77 0,13 0,20 1,03

Dromolaxia -Meneou Municipality Flats Horizontally divided 12 0,93 0,98 0,18 0,20 1,06

Livadia Municipality Flats Horizontally divided 65 0,79 0,77 0,11 0,20 1,02

Livadia Municipality Houses Horizontally divided 6 0,95 0,95 0,09 0,20 1,01


Rural Areas Houses Horizontally divided 100 0,91 0,93 0,16 0,20 1,06


6.3.1 Comments on Larnaca District Ratios

Residential Fields

Due to the very limited number of sales it was very difficult to arrive at sound results for the

municipalities as well as for the rural areas. Ratios were performed only for Aradippou

municipality. The median ratio falls within the standards. As regards the COD indicator, it is

very close to the standard limits. In respect of the PRD indicator, the observations fall outside

the standard limit. The PRD indicator shows assessment regressivity in the observations.

As regards the rural areas, the median ratio is below the limits. The COD indicator is close to

the standard limits (0,30 instead of 0,25). The PRD indicator falls outside the standard limits.



municipality median ratios are within the limits. As regards the COD indicator, 75% of the

municipality’s ratio is within the limits and the remaining is very close to the limits. In respect

of the PRD indicator, 25% of the municipalities fall within the standard limits and the remaining

are relatively close. The PRD indicator shows assessment regressivity in the observations.

In the rural areas, the median ratio and PRD indicators are within the standard limits. The COD

indicator is close to the standard limits (0,22 instead of 0,20).


For flats about 60% of the municipality ratios are within the limits. As regards the COD

indicator, all municipalities fall within the standard limits. The PRD indicator is good as about

60% fall within the standard limits.

Shops/Offices were observed only in Larnaca municipality. The number of observations is 31.

The median ratio indicator for the offices falls within the standard limits and for shops falls

outside the limits. As regards the COD both offices and shops fall within the standard limits.

In respect of the PRD indicator, offices are very close to the standard limits and shops fall

outside the limits.

In respect of the rural areas, the median ratio standards for the houses fall within the standard

limits, in contrast with the flats which fall outside the limits. In respect to the COD both houses

and flats fall within the limits. Concerning the PRD indicator, the flats are very close to the

upper limit of the standard, while for houses are outside the standard limits.


Due to the very limited number of sale transactions between 01.01.2012 and 31.12,2013 sales

have been selected from 01.01.2008 and time adjusted by the CBC Property Price Index. This

ratio study results are presented below:


Larnaca District Type of propertyNo. of

observ.

Mean

Ratio

Median

Ratio

(IAAO Standard)

0,9 <= M.R=<1,1

COD

IAAO

Standard

COD

PRD

(IAAO

Standard)

0,98 <=PRD =< 1,03

Larnaca Municipality Houses Non- Horizontally divided 16 1,30 1,46 0,25 0,25 1,11

Aradippou Municipality Houses Non- Horizontally divided 20 0,79 0,67 0,39 0,25 1,09

Despite the attempt to improve the quality of the ratio by selecting additional number of sale

observations from the previous years and applying a time adjustment factor, the total

observations were not significant in number so as to improve the quality of the ratio. In general,

Larnaca district suffers from low number of observations for units non-horizontally divided.

6.4 Paphos District

Paphos District Type of propertyNo. of

observ.

Mean

Ratio

Median

Ratio

(IAAO

Standard) 0,9 <= M.R=<1,1

COD

IAAO

Standard

COD

PRD

(IAAO

Standard) 0,98 <=PRD =< 1,03

Paphos Municipality Residential Fields 4 0,92 0,92 0,15 0,25 1,09

Paphos Municipality Touristic Fields 6 1,02 0,83 0,40 0,25 1,17


Paphos Municipality Residential Building sites 16 0,89 0,99 0,25 0,20 1,25

Geroskipou Municipality Residential Building sites 9 0,94 0,97 0,14 0,20 0,94

Pegeia Municipality Residential Building sites 11 0,95 0,97 0,10 0,20 1,01

Polis Municipality Residential Building sites 7 0,93 0,97 0,06 0,20 1,02

Rural Areas Residential Building sites 56 0,88 0,88 0,18 0,20 1,03

Paphos Municipality Flats Horizontally divided 424 0,96 0,96 0,18 0,20 1,05

Paphos Municipality Houses Horizontally divided 88 1,01 0,98 0,17 0,20 1,05

Paphos Municipality Shops Horizontally divided 15 1,16 1,20 0,26 0,20 1,06

Geroskipou Municipality Flats Horizontally divided 32 0,97 0,95 0,16 0,20 1,00

Geroskipou Municipality Houses Horizontally divided 9 1,01 1,01 0,13 0,20 1,02

Pegeia Municipality Flats Horizontally divided 96 1,00 0,96 0,18 0,20 1,03

Pegeia Municipality Houses Horizontally divided 150 1,00 1,01 0,18 0,20 1,04

Polis Municipality Flats Horizontally divided 16 1,08 1,01 0,22 0,20 1,02

Polis Municipality Houses Horizontally divided 5 1,06 0,98 0,16 0,20 1,04



Pegeia Municipality Houses Non Horizontally divided 41 0,90 0,92 0,26 0,20 1,14

Rural Areas Houses Non Horizontally divided 95 0,72 0,73 0,32 0,20 1,14

6.4.1 Comments on Paphos District Ratios

Residential Fields


the municipalities as well as for the rural areas. About 50% of the median ratio falls within the

standard. As regards the COD indicator about 50% of the municipalities fall within the limits.

In respect of the PRD indicator all observations in the municipalities fall outside the standard and

thus further investigation is needed.

As regards the rural areas, the median ratio is below the limits. The COD indicator is outside the

standard limits. The PRD indicator is within the standard limits.



The number of observations is higher than those of residential fields. All of the municipality

median ratios fall within the standard limits. About 75% of the municipalities fall within the

COD standard and the remaining are very close. As regards the PRD indicator about 50% fall

within the standard. For the remaining 50%, Paphos municipality shows regressivity and

Geroskipou municipality progressivity.

In the rural areas, the median ratio, the COD and PRD indicators are all within the limits.


In some municipalities the observations for the flats are very low. The entire municipality’s

median ratio falls within the standard limits. As regards the COD indicator, about 88% fall

within the standard limits and the remaining are very close. In respect of the PRD indicator,

about 50% falls within the standard limits and the remaining are relatively close.

Shops were only observed in Paphos municipality and these were very low. All the indicators

(median ratio, COD and PRD) fall outside the standard limits due to the very limited number of

observations.

Regarding the rural areas for flats/houses, all the observations fall within the median ratio

standards. In respect to the COD indicator about 50% falls is within the limits, while the

remaining 50% is very close to it. Concerning the PRD indicator for houses, it is very close to

the limits (1,04 instead of 1,03, which is the upper limit), while for the flats the indicator is

outside the limits which purports regressivity.


Observations were available for analysis only in Pegeia municipality. The median ratio for

houses in this municipality was within the limits. The COD indicator falls outside the standard

limits. Further investigation is needed. In respect of the PRD indicator, the observations fall

outside the standard and assessment regressivity is indicated.

In respect of the rural areas, the median ratio, COD and PRD indicators are outside the standard

limits. Further investigation is needed. The PRD results indicate assessment regressivity.


6.5 Famagusta District

Famagusta District Type of propertyNo. of

observ.

Mean

Ratio

Median

Ratio

(IAAO

Standard) 0,9

<= M.R=<1,1

COD

IAAO

Standard

COD

PRD

(IAAO

Standard) 0,98 <=PRD =< 1,03

Agia Napa Municipality Touristic Fields 7 0,90 1,16 0,22 0,25 1,39

Deryneias Municipality Residential Fields 5 0,72 0,78 0,17 0,25 1,33

Paralimni Municipality Residential Fields 16 0,61 0,53 0,34 0,25 1,11

Agia Napa Municipality Flats Horizontally divided 27 0,91 0,82 0,21 0,20 1,02

Agia Napa Municipality Houses Horizontally divided 6 0,77 0,77 0,01 0,20 1,00

Deryneias Municipality Flats Horizontally divided 28 0,89 0,82 0,18 0,20 1,03

Deryneias Municipality Houses Horizontally divided 19 0,96 0,92 0,13 0,20 1,03

Paralimni Municipality Flats Horizontally divided 126 0,93 0,90 0,17 0,20 1,03

Paralimni Municipality Houses Horizontally divided 60 0,90 0,88 0,15 0,20 1,03

Sotiras Municipality Houses Horizontally divided 7 1,14 1,07 0,17 0,20 1,05



Agia Napa Municipality Houses Non Horizontally divided 5 0,85 0,85 0,04 0,15 0,98

Paralimni Municipality Houses Non Horizontally divided 17 0,59 0,61 0,42 0,15 1,04

Rural Areas Houses Non Horizontally divided 21 0,83 0,82 0,24 0,20 1,16

6.5.1 Comments on Famagusta District Ratios

Residential Fields

Due to the very small number of sales it was very difficult to arrive at sound results for the

municipalities. The median ratio, COD and PRD indicators fall outside the standard limits and

further investigation is needed.

As regards the rural areas, the observations were very limited and thus no ratio analysis was

performed.


Due to the very small number of sales it was very difficult to arrive at sound results for the

municipalities. A number of observations were excluded from the analysis because after

investigation they were considered as outliers (mismatch of data). Therefore, due to the very

small number of observations no ratio analysis was performed.

In the rural areas, only two observations were available and thus no ratio analysis was

performed.



municipality’s median ratio falls within the standard limits. As regards the COD indicator, about

86% fall within the standard limits and the remaining are very close. In respect of the PRD

indicator, about 86% falls within the standard limits and the remaining are relatively close.

No observations were available for commercial properties.

Regarding the rural areas for flats/houses, all the observations fall within the median ratio, COD

and PRD standard limits.



The number of available observations for analysis was very limited for the two municipalities.

For Ayia Napa municipality, the median ratio, COD and PRD indicators fall within the standard

limits, while for Paralimni municipality the three indicators fall outside the limits.

In respect of the rural areas, the number of available observations for analysis was very limited.

The median ratio, COD and PRD indicators are outside the standard limits. Further investigation

is needed.

6.6 Other Comments

The number of observations was very limited as regards commercial properties

(shops/offices/industrial) and the study was performed with this restriction. Some conclusions

are drawn in the next chapter.

7. Conclusions

Conclusions have been drawn below in respect of the ratio study as well as other commentary by

property type, district and geographical areas. The conclusions were drawn by property type

rather than by geographical area. The reason was that this approach was considered more

explanatory and holistic in terms of focussing on specific issues that happen to appear repeatedly

in each district and property type. Based on the conclusions and findings of the study a number

of recommendations are also presented.

7.1 Summary of Ratio Study Results

7.1.1 Residential Fields

The study proved that sale transactions for this type of property were very limited in all districts.

One of the reasons that observations for this type of property is very low is that vacant fields in

the urban areas have been reduced dramatically due to the urbanization of the municipal

authorities and the concentration of the population in these geographical areas in the recent

years. As a consequence, it is observed that there is a high demand for building sites ready for

residential development in order to meet the housing needs of the population. The limited

number of undeveloped residential land is less attractive bearing in mind that a considerable

number of vacant building sites are available for development in each district.

The inherent restriction of low number of observations during the period 01.01.2012 to

31.12.2013 has affected the quality of the statistical analysis and was a major weakness to arrive

at sound results. Further, in the absence of adequate number of observations, an approach to

select sale transactions beyond the aforementioned periods was impossible to implement,

because there is no land index available at this point in time.

Limassol, Larnaca and Paphos municipalities’ ratio studies indicates that about 50% are within

the median ratio and COD standard limits. In respect of PRD indicator, in some cases further

investigation is needed because assessment regressivity is observed. Nicosia and Famagusta

municipalities’ ratio studies had a median ratio and COD beyond the standard limits. In respect


of PRD indicator, in some cases further investigation is needed because assessment regressivity

is observed.

In respect of the rural areas, Nicosia, Larnaca, Limassol and Paphos had the median ratio below

standard. The COD indicator for Limassol and Larnaca was close to the standard limits and for

Nicosia and Paphos was outside the limits and further investigation is needed. In respect of PRD

indicator, Limassol and Paphos rural areas were within the standard limits, in contrast to Nicosia

and Larnaca for which the PRD indicator was outside the limits, thus assessment regressivity

was observed.

7.1.2 Residential Building Sites

The number of sale transactions for residential building sites is much higher that the respective

fields and this has improved the quality of the ratio study indicators except for Famagusta

district. The results are summarized below in a table:

District

No. of

Municip.

Median Ratio

(Percentage of

municipalities

falling within the

limits)

COD

(Percentage of

municipalities falling

within the limits)

PRD

(Percentage of


within the limits)

Nicosia 9 89%

(remaining below

limit)

77% 44%

(remaining above

limit)

Limassol 6 67%

(remaining below

limit)

100% 17%

(remaining above

limit)

Larnaca 4 75%

(remaining below

limit)

75% 25%

(remaining above

limit)

Paphos 4 100%

75% 50%

(remaining 50% is

shared equally below

and above limits)

Famagusta 4 n/a n/a n/a

The overall results are considered to be good in comparison with the number of observations.

The quality of the ratio results in some municipalities is outside the standard limits, thus further

investigation will be carried out.

In respect to the rural areas, the median ratio in Limassol, Larnaca and Paphos was within the

limits and for Nicosia very close to the limits. The COD indicator for Nicosia, Limassol and

Paphos was within the standard limits and for Larnaca was very close. The PRD indicator for all

districts was within the standard limits.


7.1.3 Horizontally Divided Units (HDU)

The number of sale transactions for HDU (flats) is much higher compared with the residential

fields or building sites. The results of the ratio study are summarized below in a table:

District

(flats)

No. of

Municip.

Median Ratio

(Percentage of

municipalities

falling within the

limits)

COD

(Percentage of

municipalities

falling within the

limits)

PRD

(Percentage of


within the limits)

Nicosia 9 10%

(remaining below

limit)

100% 64%

(remaining above

limit)

Limassol 6 30%

(remaining below

limit)

80% 70%

(remaining above

limit)

Larnaca 4 60%

(remaining below

limit)

100% 60%

(remaining above

limit)

Paphos 4 100%

88% 50%

(remaining above

limit)

Famagusta 4 57%

(remaining below

limit)

86% 86%

(remaining above

limit)

The overall results are considered to be good in comparison with the number of observations.

Specifically the COD results indicate a very good level of uniformity. The quality of the ratio

results in some municipalities is outside the standard limits, thus further investigation will need

to be carried out.

In respect to flats in the rural areas, the median ratio in Limassol, Paphos and Famagusta fall

within the limits, while in Nicosia and Larnaca are very close to the limits. The COD indicator

for Nicosia, Larnaca, Paphos and Famagusta fall within the standard limits, while for Limassol

was very close. The PRD indicator for Famagusta was within the standard limits, while all the

other districts were outside the limits and assessment regressivity is observed.

7.1.4 Non- Horizontally Divided Units (NHDU)

The number of sale transactions for NHDU (houses) is lower compared with the horizontally

divided units. An additional restriction was that clear data were only available between

01.01.2012 to 31.7.2013 and not including the whole year 2013. For this reason, it was

impossible to perform a ratio study in some municipalities. For example, in Nicosia district

seven out of nine municipalities was possible to be analysed, four out of six in Limassol district,

one out of four for Paphos district, two out of four for Famagusta district and non for Larnaca

district.


District

(houses)

No. of

Municip.

Median Ratio

(Percentage of

municipalities

falling within the

limits)

COD

(Percentage of

municipalities

falling within the

limits)

PRD

(Percentage of

municipalities

falling within

the limits)

Nicosia 9 43% and the

remaining were very

close to the limits

43% and the

remaining were very

close to the limits

Outside

Limassol 6 50% Outside 25%

Larnaca 4 No analysis - Low

number of observations

No analysis - Low

number of

observations

No analysis - Low

number of

observations

Paphos 4 100% (only for 1

municipality) Outside Outside

Famagusta1 4 50% (only for 2

municipalities) 50% (only for 2

municipalities) 50% (only for 2

municipalities 1

For Ayia Napa municipality, MR, COV and PRD results fall within the limits but for Paralimni all indicators were outside the limits

7.1.5 Summary of Ratio Study Results for Commercial Properties

As noted in the previous chapter, commercial properties (shops/offices/industrial) have the

inherent problem of very low number of sale transactions. This is a common phenomenon in

other countries (U.K, Ireland, USA) because these type of properties are considered as

investment properties and are commonly rented rather than sold over short periods of time. For

example in UK, the taxation on these properties is based on annual rent rather than on the market

value. The case for Cyprus is the same as many other European countries that even without the

economic recession the market lacks a sufficient number of sale transactions to support a sound

ratio study. On the other hand, the DLS has made an attempt with very limited data available to

perform a ratio study in each district, the results of which are presented in the previous chapter.

The conclusions are summarized below:

District (shops/

Offices)

No. of Municip.

Observed/Total

Municip.

Median Ratio (Percentage of


within the limits)

COD (Percentage of


within the limits)

PRD (Percentage of


within the limits)

Nicosia 4/9 75% and the

remaining were

above the limits

50% 25% and the

remaining were above

the limits

Limassol 3/6 33% % and the

remaining were

below the limits

33% 33% and the


the limits

Larnaca 2/4 100% 100% 50% and the


the limits

Paphos 1/4 Outside and above

the limits Outside Outside and above

the limits

Famagusta n/a n/a n/a n/a

The ratio results (MR, COD and PRD) for Larnaca district are good. The ratio results for

Nicosia and Limassol districts are good in some municipalities, while in other further

investigation is needed. Ratio results for Paphos district are outside the expected limits, thus


further investigation is needed. As noted above the number of observations was very limited in

order to arrive at sound results in the analysis.

7.1.6 Other Comments on Ratio Study Results

In some of the municipalities at national level it is observed that if the median ratio falls outside

the standard limits, this is concentrated below the lower standard limit. In other words, the trend

in all districts is that the recent GV assessment is lower than the sale price. Further investigation

is needed to identify the causes associated with the ratio outliers.

The DLS has already given instructions at district level to reassess specific geographical areas,

both in urban and rural areas. Further instructions were given to specify and create micro-

location areas so that the assessment value will be adjusted accordingly to achieve fairness,

uniformity and equity.

7.2 Time Adjustment and Quality of Results

As already noted in this study, the sales applied in the ratio study are not time adjusted and in

such case the results could have been better. This is a prerequisite2 when selecting sale

transactions that have occurred beyond a year, either before or after the crucial date. Another

reason that time adjustment should be applied is because the economy and the property market

are abnormal and extremely annual increases/decreases are experienced in property prices.

Summarizing, the quality of a ratio study is therefore greatly dependent on the market conditions

within the period of analysis and time adjustment is a mechanism available to improve the ratio,

other things being equal.

7.3 Data Availability and Quality

As noted in the study the number of observations and its representativeness has a critical role to

play in the ratio study analysis. Matching of appraisal and market data as well as other filtering

is of equal importance so that accuracy and integrity of results are achieved in the ratio study.

The DLS has made every effort to have available for analysis qualitative data in order to produce

the best possible results in the ratio study. On the other hand, any outliers that have already been

identified during the ratio study, have been forwarded to each district office for further

investigation.

7.4 Comments on the Uniformity, Level of Appraisal, and Vertical

Equity

7.4.1 Uniformity

The ratio study results turn out to show that the COD indicator is sound and acceptable in all

districts in respect of building sites and horizontally divided units (flats) with some observations

that need further analysis because they fall outside the standard limits. As regards non

horizontally divided units (houses) and residential fields, the ratio results indicate that the COD

2 IAAO standard on ratio study


is relatively close to the standard limits with exception of some geographical areas where further

investigation is needed (e.g. buffer zone, double zones, different or change in physical and legal

characteristics, mixed uses, mistaken data entries, missing values).

As a general guide the smaller the measure the better the uniformity (COD =<0,20).

The COD results by district and property type are presented below in a series of graphs as well

as the respective benchmark in accordance with the IAAO standard limits for comparison

purposes.

7.4.1.1 Building Sites

0,16

0,29

0,150,17 0,16

0,120,11

0,15

0,21

0,18

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

NicosiaMunic.

AglantziaMunic.

Geri Munic. EgkomiMunic.

Dali Munic. LakatamiaMunic.

LatsiaMunic.

StrovolosMunic.

Tseri Munic. Rural Areas

COD INDICATOR - BUIDLING SITES IN NICOSIA DISTRICT

CODAssessment

IAAOStandard

0=<COD<=0,20


0,16

0,14

0,20

0,19

0,16 0,16

0,18

0,12

0,13

0,14

0,15

0,16

0,17

0,18

0,19

0,20

0,21

Limassol Munic. Agios Athanasios

Munic.

Germasogia

Munic.

Kato Polemidia

Munic.

Mesa Geitonia

Munic.

Ypsonas Munic. Rural Areas

COD INDICATOR - BUILDING SITES IN LIMASSOL DISTRICT

COD

IAAOStandard0=<COD<=0,20

0,22

0,19

0,17

0,22

0,00

0,05

0,10

0,15

0,20

0,25

Larnaca Munic. Aradippou Munic. Livadia Munic. Rural Areas

COD INDICATOR - BUILDING SITES IN LARNACA DISTRICT

COD

IAAOStandard

0=<COD<=0,20


0,25

0,14

0,10

0,06

0,18

0,00

0,05

0,10

0,15

0,20

0,25

0,30

Paphos Munic. Geroskipou Munic. Pegeia Munic. Polis Munic. Rural Areas

COD INDICATOR - BUILDING SITES IN PAPHOS DISTRICT

COD

IAAOStandard

0=<COD<=0,20

7.4.1.2 Horizontally Divided Units (Flats)

0,20

0,17

0,15

0,09

0,18

0,12

0,140,13

0,17

0,10

0,08

0,20

0,05

0,07

0,09

0,11

0,13

0,15

0,17

0,19

0,21

Nic

osia

Mu

nic

.

Ag.

Do

me

tios

Mu

nic

.

Agla

ntz

ia

Mu

nic

.

Ge

ri

Mu

nic

.

Egk

om

iM

un

ic.

Da

li

Mu

nic

.

La

ka

ta

mi

a M

un

ic.

La

tsia

Mu

nic

.

Str

ov

olo

s

Mu

nic

.

Str

ov

olo

s

Mu

nic

.

Tse

ri

Mu

nic

.

Ru

ral

COD INDICATOR - HDU (Flats) IN NICOSIA DISTRICT

COD

IAAO

Standard0=<COD

<=0,20


0,17 0,18

0,20

0,13 0,130,11

0,22

0,00

0,05

0,10

0,15

0,20

0,25

Limassol Munic. Ag. AthanasiosMunic.

GermasogiaMunic.

Kato PolemidiaMunic.

Mesa GeitoniaMunic.

Ypsonas Munic. Rural Areas

COD INDICATOR - HDU (Flats) IN LIMASSOL DISTRICT

COD

IAAO

Standard0=<COD

<=0,20

0,20

0,13

0,18

0,11

0,18

0,00

0,05

0,10

0,15

0,20

0,25

Larnaca Munic. AradippouMunic.

Dromolaxia -Meneou Munic.

Livadia Munic. Rural Areas

COD INDICATOR - HDU (Flats) IN LARNACA DISTRICT

COD

IAAOStandard

0=<COD<=0,20


0,180,16

0,18

0,22 0,22

0,00

0,05

0,10

0,15

0,20

0,25

Paphos Munic. Geroskipou Munic. Pegeia Munic. Polis Munic. Rural Areas

COD INDICATOR - HDU (Flats) IN PAPHOS DISTRICT

COD

IAAOStandard

0=<COD<=0,20

0,21

0,18 0,17

0,10

0,00

0,05

0,10

0,15

0,20

0,25

Agia Napa Munic. Deryneias Munic. Paralimni Munic. Rural Areas

COD INDICATOR - HDU (Flats) IN FAMAGUSTA DISTRICT

COD



7.4.1.3 Non - Horizontally Divided Units

0,20

0,24

0,150,14

0,17

0,140,17

0,20

0,00

0,05

0,10

0,15

0,20

0,25

NicosiaMunic.

Geri Munic. EgkomiMunic.

Dali Munic. LakatamiaMunic.

Latsia Munic. StrovolosMunic.

Rural

COD INDICATOR - NHDU (Houses) IN NICOSIA DISTRICT

COD


Note: The IAAO COD standard for rural areas is increased to 0,20 instead of 0,15

0,200,22

0,20

0,340,31

0,10

0,15

0,20

0,25

0,30

0,35

Limassol Munic. Ag. Athanasios Munic. Germasogia Munic. Ypsonas Munic. Rural Areas

COD INDICATOR - NHDU (Houses) IN LIMASSOL DISTRICT

COD


Note: The IAAO COD standard for rural areas is increased to 0,20 instead of 0,15


0,260,32

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

Pegeia Munic. Rural Areas

COD INDICATOR - NHDU (Houses) IN PAPHOS DISTRICT

COD

IAAOStandard

0=<COD<=0,20

0,04

0,42

0,24

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

0,45

Agia Napa Munic. Paralimni Munic. Rural Areas

COD INDICATOR - NHDU (Houses) IN FAMAGUSTA DISTRICT

COD

IAAOStandard

0=<COD<=0,20

Note: The IAAO COD standard for rural areas is increased to 0,20 instead of 0,15.


7.4.1.4 Residential Fields

0,28

0,55

0,39

0,27

0,15

0,200,18

0,47

0,00

0,10

0,20

0,30

0,40

0,50

0,60

NicosiaMunic.

AglantziaMunic.

Geri Munic. Dali Munic. LakatamiaMunic.

StrovolosMunic.

Tseri Munic. Rural Areas

COD INDICATOR - RESIDENTIAL FIELDS IN NICOSIA DISTRICT

COD


0,240,22

0,29

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

Germasogia Munic. Ypsonas Munic. Rural Areas

COD INDICATOR - RESIDENTIAL FIELDS IN LIMASSOL DISTRICT

COD


0,26

0,30

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

Aradippou Munic. Rural Areas

COD INDICATOR - RESIDENTIAL FIELDS IN LARNACA DISTRICT

COD

IAAO

Standard0=<COD

<=0,25


0,15

0,35

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

Paphos Munic. Rural Areas

COD INDICATOR - RESIDENTIAL FIELDS IN PAPHOS DISTRICT

COD


0,17

0,34

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

Deryneia Munic. Paralimni Munic.

COD INDICATOR - RESIDENTIAL FIELDS IN FAMAGUSTA DISTRICT

COD


7.4.2 Level of Appraisal (Median Ratio)

The level of appraisal is measured by the indicator median ratio. The ratio study results of the

appraisal level by district and all property types as compared with the IAAO standard are

presented below. The conclusion is that most observations are within and some below the IAAO

standard and a few are above the standard limits. Further investigation is needed for those

observations that fall outside the limits. The median ratio (MR) results by district and property

type are presented below in a series of graphs as well as the respective benchmark in accordance

with the IAAO standard limits for comparison purposes.


1,49

1,11

0,96

0,78

0,87

0,56

0,730,69

1,000,95

1,00

0,870,82

0,910,87

0,930,89

0,84

0,76

0,88

1,31

0,70

0,85

0,760,76

0,800,75

0,72

0,800,83

1,08

0,95

0,67

0,81

0,93

0,80

1,10

0,92

0,82 0,840,83

0,86

0,40

0,50

0,60

0,70

0,80

0,90

1,00

1,10

1,20

1,30

1,40

1,50

1,60

Nico

sia M

un

ic. - Re

side

ntia

l Fie

lds

Ag

lan

tzia Mu

nic. - R

esid

en

tial F

ield

s

Ge

ri Mu

nic. - R

esid

en

tial Fie

lds

Da

li Mu

nic. - R

esid

en

tial Fie

lds

Laka

tam

ia M

un

ic. - Re

side

ntia

l Fie

lds

Stro

vo

los M

un

ic. - Re

side

ntia

l Field

s

Tse

ri Mu

nic. - R

esid

en

tial F

ield

s

Ru

ral A

rea

s - Re

side

ntia

l Field

s

Nico

sia M

un

ic. - Re

side

ntia

l Bu

ildin

g site

s

Ag

lan

tzia Mu

nic. - R

esid

en

tial B

uild

ing

sites

Ge

ri Mu

nic. - R

esid

en

tial B

uild

ing

sites

Eg

kom

i Mu

nic. - R

esid

en

tial B

uild

ing site

s

Da

li Mu

nic. -R

esid

en

tial B

uild

ing

sites

Laka

tam

ia M

un

ic. - Re

side

ntia

l Bu

ildin

g site

s

Latsia

Mu

nic. - R

esid

en

tial B

uild

ing

sites

Stro

vo

los M

un

ic. - Re

side

ntia

l Bu

ildin

g site

s

Tse

ri Mu

nic. - R

esid

en

tial B

uild

ing site

s

Ru

ral A

rea

s - Re

side

ntia

l Bu

ildin

g site

s

Nico

sia M

un

ic. - Fla

ts HD

Nico

sia M

un

ic. - Sh

op

s HD

Nico

sia M

un

ic. - Office

s HD

Ag

. Do

me

tios M

un

ic. Flats HD

Ag

lan

tzia Mu

nic. - Fla

ts HD

Ge

ri Mu

nic. - F

lats H

D

Eg

kom

i Mu

nic. F

lats H

D

Da

li Mu

nic. - Fla

ts HD

Laka

tam

ia M

un

ic. - Fla

ts H.D

Latsia

Mu

nic. -F

lats H

.D

Stro

vo

los M

un

ic. - Flats H

.D

Stro

vo

los M

un

ic. - Flats H

.D

Stro

vo

los M

un

ic. - Flats H

.D

Stro

vo

los M

un

ic. - Flats H

.D

Tse

ri Mu

nic. - F

lats H

.D

Ru

ral - Fla

ts H.D

Nico

sia M

un

ic.- Ho

use

s NH

D

Ge

ri Mu

nic. - H

ou

ses N

HD

Eg

kom

i Mu

nic. - H

ou

ses N

HD

Da

li Mu

nic. - H

ou

ses N

HD

Laka

tam

ia M

un

ic. - Ho

use

s NH

D

Latsia

Mu

nic. - H

osu

es N

HD

Stro

vo

los M

un

ic. - Ho

use

s NH

D

Ru

ral - H

ou

ses N

HD

APPRAISAL LEVEL (Median Ratio) - NICOSIA DISTRICT AND ALL PROPERTY TYPES

MedianRatio

IAAO Standard - Lower limit (0,9<=MR )

IAAO Standard - Higher Limit(MR=<1,1 )


0,76

0,85

0,700,76

0,971,00

1,05

0,77

0,67

0,92 0,92

0,73

1,061,10

0,660,70

0,79

0,71

0,83

0,65 0,67

0,75

0,68

0,85 0,870,90

0,78

0,95

0,830,77

0,860,82

0,50

0,60

0,70

0,80

0,90

1,00

1,10

1,20

1,30

1,40

1,50

1,60

1,70

1,80

1,90

2,00

2,10

Germ

asogia Munic. - R

esidential Fields

Ypsonas Munic. - Residential Fields

Rural Areas - Residential Fields

Rural Areas - Residential Fields

Limasso

l Munic. - Res. Building Sites

Agios A

thanasios Munic. -Res. Building…

Germ

asogia Munic. - R

esidential Fields

Kato Polemidia M

unic. -Res. Building Sites

Mesa G

eitonia Munic.- Res. Building Sites

Ypsonas Munic. - Res. Building Sites

Rural Areas - Res. Building Sites

Limasso

l Munic. - Flats H

D

Limassol M

unic. -Flats HD

Limasso

l Munic. -Shops H

D

Limassol M

unic. -Offices H

D

Agios A

thanasios Munic. - Flats H

D

Agios A

thanasios Munic. - H

ouses HD

Germ

asogia Munic. Flats H

D

Germ

asogia Munic. -H

ouses HD

Germ

asogia Munic. -Shops H

D

Kato Polemidia M

unic. -Offices H

D

Mesa G

eitonia Munic. - Flats H

D

Ypsonas Munic. - Flats H

D

Ypsonas Munic. - Flats H

D




Limassol M

unic. - Houses N

HD

Agios A

thanasios Munic. - H

ouses NH

D

Germ

asogia Munic. - H

ouses NH

D

Ypsonas Munic. - H

ouses NH

D

Rural Areas - Houses N

HD

APPRAISAL LEVEL (Median Ratio) - LIMASSOL DISTRICT AND ALL PROPERTY TYPES

MedianRatio




1,06

0,80

1,00

0,930,88

0,79

0,90

0,94

0,74

0,88

1,21

1,00

0,77

0,98

0,77

0,95 0,84 0,93

0,15

0,35

0,55

0,75

0,95

1,15

Aradippou M

unic. - Res. Fields

Rural Areas - Res. Fields

Rural Areas -Tourist Fields

Larnaca Munic. - Res. Building

sites

Aradippou M

unic. Res. Buildingsites

Drom

. -Meneou M

unic. -Res.Build. sites

Livadia Munic. - R

es. Building sites

Rural Areas - Res. Building sites

Rural Areas - Touristic Buildingsites

Larnaca Munic. - Flats H

D

Larnaca Munic. - Shops H

D

Larnaca Munic. - O

ffices HD

Aradippou M

unic. - Flats HD

Drom

olaxia -Meneou M

unic. -Flats H

D


D


D


Rural Areas - Houses H

D

APPRAISAL LEVEL (Median Ratio) - LARNACA DISTRICT AND ALL PROPERTY TYPES

Median

Ratio




0,92

0,83

0,65

0,990,97 0,97 0,97

0,88

0,960,98

1,20

0,95

1,01

0,96

1,01 1,010,98

0,88 0,88

0,92

0,73

0,50

0,60

0,70

0,80

0,90

1,00

1,10

1,20

APPRAISAL LEVEL (Median Ratio) - PAPHOS DISTRICT AND ALL PROPERTY TYPES

MedianRatio

IAAO Standard -

Lower limit (0,9 <=MR )



1,16

0,78

0,53

0,820,77

0,82

0,920,90 0,88

1,07

0,850,89

0,85

0,61

0,82

0,15

0,25

0,35

0,45

0,55

0,65

0,75

0,85

0,95

1,05

1,15

APPRAISAL LEVEL (Median Ratio) - FAMAGUSTA DISTRICT AND ALL PROPERTY TYPES

MedianRatio

IAAO Standard -

Lower limit (0,9 <=MR )



7.4.3 Vertical Equity (PRD)

As explained in paragraph 5.4 of this study, PRD is a measure of the systematic differences in

the appraisal of low and high value properties from the market value and the index statistic for

this is the “Price Related Differential” (PRD). The ratio study results have an inherent weakness

due to the limited number of observations. According to the IAAO standard3 when the samples

are small, they may have high dispersion, or include properties with extreme values, the PRD

may not provide an accurate indication of assessment regressivity or progressivity.

The ratio study results of the PRD by district and all property types as compared with the IAAO

standard are presented below. The conclusion is that most observations are within and some

above the IAAO standard. Further investigation is needed for those observations that fall outside

the limits.

The PRD results by district and property type are presented below in a series of graphs as well as

the respective benchmark in accordance with the IAAO standard limits for comparison purposes.

3 Standard on Ration Studies 2013


1,21

1,39

1,57

1,31

1,08

1,12

1,071,091,09

1,051,061,02

1,06

1,031,011,03

1,051,031,04

1,11

1,06

1,021,05

1,00

1,05

1,011,021,01

1,05

0,99

1,08

1,031,00

1,04

1,101,08

1,11

1,23

1,051,06

1,13

1,06

0,90

1,00

1,10

1,20

1,30

1,40

1,50

1,60

PRD INDICATOR - NICOSIA DISITRICT AND ALL PROPERTY TYPES

PRD

IAAO

Standard - Lower Limit (0,98<= PRD

IAAOStandard - Upper Limit (1,03=< PRD


0,99

1,021,03

1,00

1,04

1,09

1,04

1,05

1,02

1,09

1,031,04

1,10

1,03

1,10

1,03

1,021,03

1,08

1,20

1,02 1,02 1,02 1,02

1,05 1,05

1,30

1,03

1,17

1,06

1,56

1,02

0,93

0,97

1,01

1,05

1,09

1,13

1,17

1,21

1,25

1,29

1,33

1,37

1,41

1,45

1,49

1,53

1,57PRD INDICATOR - LIMASSOL DISTRICT AND ALL PROPERTY TYPES

PRD

IAAOStandard - Lower Limit (0,98<= PRD



1,15

1,19

1,051,06

1,051,04

1,03 1,03

0,73

1,07

1,11

1,041,03

1,06

1,02 1,01

1,041,06

0,70

0,80

0,90

1,00

1,10

1,20

PRD INDICATOR - LARNACA DISTRICT AND ALL PROPERTY TYPES

PRD

IAAO

Standard - Lower Limit (0,98<= PRD

IAAO

Standard - Upper Limit (1,03=< PRD


1,09

1,17

1,03

1,25

0,94

1,01 1,02

1,031,05 1,05

1,06

1,00 1,02

1,031,04

1,02

1,04

1,07

1,04

1,14 1,14

0,80

0,90

1,00

1,10

1,20

1,30PRD INDICATOR - PAPHOS DISTRICT AND ALL PROPERTY TYPES

PRD




1,39

1,33

1,11

1,021,00

1,03 1,03 1,03 1,03

1,05

1,01

1,010,98

1,04

1,16

0,90

1,00

1,10

1,20

1,30

1,40

PRD INDICATOR - FAMAGUSTA DISTRICT AND ALL PROPERTY TYPES

PRD




7.4.4 Conclusions on the findings of holistic graphical presentation

of COD, Median Ratio and PRD indicators

Based on statistical analysis, this study has proved that the COD assessment is very good which

purports that the recent general valuation has achieved a very good level of uniformity

(horizontal equity) to the taxpayers. In other words, assessed values are spread at equal distances

between the median value.

In respect to the median ratio, the study has proved that the assessed values are located within

the lower limits of the standard or fall just below the lower limits as defined by the IAAO

standard. In other words, the median overall assessment values fall within the lower limit or are

very close to the lower limit and this is very much neutralized for the taxpayer when combining

the results with the good COV assessment results. The tendency of the median assessment

indicates that the GV prices are relatively lower than the market values or are very close to the

lower limits defined by the IAAO standard.

The third indicator which is the PRD (vertical equity), the study has proved that the overall

tendency is that the ratio is concentrated within the upper limit or close but above the upper limit

as compared with the standard. There is an inherent limitation of a small number of observations

in this study and as noted by the IAAO standard, this tends to show that PRD is high.

Furthermore, as in our case the PRD indicator is concentrated on the upper level of the standard

limit, regressivity can be observed. This means that high value properties are under-appraised or

lower value properties are under-appraised. Further investigation and analysis should be a

continuous process of improving the quality of the data and the quality of appraisal by the DLS.

It is important to highlight that the aforementioned results were based on sale transactions that

have not been time adjusted, either forward or backwards to the recent GV date (01.01.2013).

The IAAO standard suggest not to time adjust when selecting sales transactions within a year

before and after the crucial date. As noted in this report there is no land index either from the

CBC or within the DLS at his point in time that can be used to time adjust land values. For

information purposes, according to the CBC Residential Price Index, values have fallen by

5,13% from 01.01.2012 to 01.01.2013 and by 9,16% from 01.01.2013 to 01.01.2014. In other

words, the existing ratio studies could have been more accurate, if time adjustment was applied

for all sales.

7.4.5 Comments on Outliers

It is common in the ratio studies that a number of observations are considered as outliers and

have to be trimmed. There are various reasons for this, the most common ones being those

which the status of the property characteristics (physical and/or legal) at the date of the sale does

not match with the respective ones at the date of assessment. It is therefore expected that the

number of sale transactions available for analysis at the initial stage will be reduced in order to

arrive at clear and qualitative data for analysis. The higher the numbers of observations, the

better the results are expected.

The DLS has identified and examined a number of observations that are considered outliers after

the ratio study results and these have been excluded from the analysis. The type of each outlier

has been categorized and instructions will be given at district level, to reassess those

observations that appear in the data sets.


Furthermore outliers can be observed from the number of applications lodged either for

correction of errors or valuation objections. International practice in various countries suggests

that the number of valuation objections/correction of errors lies between 3% and 5% of the total

number of properties appraised. These percentages are not fixed but vary depending on a

number of factors (economic activity and property market conditions, physical characteristics of

territories, legal framework, type of property, local demographics, homogeneous structures,

socioeconomic conditions, level of transparency and property market efficiency, efficient

valuation departments and land registration systems, sound institutional framework, frequency of

valuation/revaluation assessments, the system of appeals). It is important to highlight that the

more frequent the revaluations the less are the numbers of valuation objections and vise versa.

Another crucial factor is to distinguish between different types of properties, especially

residential and commercial.

IAAO has not recently produced any statistical survey on appeal rates. In most states (USA) this

rate lies between 3% to 5%. According to recent statistics in Huston (Harris County) and

Washington, the rates were 20% and 16%, respectively. In Denmark, the appeals for dwellings

in 2005 and 2007, were 0,6% and 2,6% respectively. For commercial properties the appeals

2006 and 2008 were 1,7% and 2,3%, respectively. In Netherlands the following are the facts for

administrative objections.

Valuation date 01.012012 01.01.2011 01.01.2010

Residential properties under

objections 3,7% 3,7% 3,4%

Non-residential properties 8,8% 8,2% 7,6%

In Hong Kong, China, the rating revaluation is performed annual and for the years 2006, 2007

and 2008, the objections rates were 2,8%, 1,8% and 1,7% respectively.

In our case, bearing in mind that a period of six months has been ended as regards the right to

lodge an application for valuation objection, but this has been extended to 25 April 2015, the

total number of valuation objections is very small (n=85). Applications for correction of errors

are 17.387 over 1,2 million properties, which is 1,4% to the total. Although it is difficult to

interpret the volume of appeals between different countries, 1,4% for Cyprus in comparison to

other countries is positive especially taking into consideration the weakness that the last general

valuation in Cyprus was made 33 years ago (1980). People are required to pay property tax for

the second consecutive year on a new valuation following the payment of taxes last year for the

first time on the1980 value. Realistically, the 1,4% noted is expected to be increased slightly by

the end of 25th

April 2015, which is the ending date for valuation objections, but mainly because

the DLS is reviewing geographical areas which assessments seem to be above market value. In

any case, it is important to note that the percentage is expected to fall to the minimum as the

DLS will make every effort to complete all applications for correction of errors, valuation

objections and reviewing some geographical areas, before the new valuation roll will be

forwarded to the tax authorities in June 2015. As a safeguard, the current law provides for

refund for any excess property taxes after successful applications by the tax payers.

7.5 Application of Geographic Information Systems in Ratio Study

Analysis and Results

GIS tools have been used by the Valuation and General Valuation Sections for many years and

have assisted the two branches in the current business processes of the General Valuation.


During the preparation of this study, the ratio results for «building sites» within the municipality

of Lakatamia have been selected and presented in two maps (see pages 61-62). GIS application

has been used as a tool to produce a series of multipurpose maps enabling the valuers (central

and district level) to visualize the ratio results in a specific geographical area and being able to

assess the quality of results as well as identifying possible deviation values from the standard

limits. This assessment can be made for specific geographical areas, property type,

neighborhood or any other combination. Furthermore, GIS has also been used during this study

to investigate specific observations that fall outside the limits (outliers) and practically to

validate that property characteristics at the date of the sale are identical with those used in the

recent general valuation.

The two basic maps produced are described below:

In the maps presented, it is possible to identify the location of each individual parcel by its parcel

number as well as its basic physical (extent, shape, access, relation to road, slope, structures etc.)

and legal characteristics (planning zone etc.). Also, it is feasible to visualize the parcel or

property using satellite image and aerial photography.

On the same map, the sales ratio results have been linked with the parcel number and delineated

in different color according to the classification predefined as follows:

A noted above, the production, presentation and assessment of ratios in maps was only

performed for one municipality but this can be applied rather easy for the whole of the island in

the live environment where GIS applications are already running within the Department.

Baring in mind the aforementioned capabilities presented, the DLS has the capacity to fully

utilize GIS applications in the business process of the general valuation and especially in the

quality assurance process of the general valuation.




7.6 Property Market Sentiment and its Limitations for the Study

The property market after September 2008 has shown a continued decline and has been in great

distress due to the global as well as the national economic crisis. This is evident by reference to

the CBC Residential Property Price Index as well as by the RICS Cyprus Property Index. The

RICS Cyprus Property Index covers almost all type of properties (commercial and residential) as

well as rental indices over the years. This index is not based on sale transactions or private

valuations, but is produced based on hypothetical or notional buildings, each having specific

characteristics and the estimated price levels are carried out by accredited RICS property

professionals who are active in the relevant markets. Both these indices show the steep decline

in prices from Q4 of 2012 to Q3 of 2013 which continues thereon at a lower rate.

The above is also supported by evidence to the decline in the number of sale transactions

registered within the DLS, which have been reduced since 2008, from 18.564 down to 8.051 in

2014 (Nov.), a total decreased of 56,63%.

When experiencing abnormal economic conditions and property markets are suffering from

distress, the availability and quality of information to complete such studies is much more

difficult, however the researcher is obligated to tackle these problems by applying alternative but

reliable methodologies that will improve these limitations but this purports additional resources

(time, cost and human factor). Although the decline was taken into account when determining

the values at the GV date 1.1.2013, the rate of decline for each geographical area and type of

property could in fact be calculated at a later stage when analysing sales which , after the date of

valuation. This varied rate could only be anticipated at the date of valuation and based on the

actual sales which were rather inconsistent at that time due to the economic crisis. Also, the

property indices available in Cyprus at district level lag behind three to six months before

publication.

7.7 DLS Capabilities in Ratio Studies as a Tool for Quality Assurance

in GV Process

It is a common practice that ratio studies are used as a decision making tool to quality assure the

results of a new general valuation and before the publication of results. The ratio study will

indicate whether any further action is needed to be taken by the competent authorities to correct

any assessment outliers that may fall below or above predefined statistical standards or apply the

IAAO standards. The case of DLS is that the new general valuation was completed almost within

a years’ time and there was no adequate time to thoroughly perform such a study of this extent,

independent of the quality of the outcome. It should be noted that the DLS has performed a

number of quality control procedures before the publication of results.

At this stage in time, it is believed that the knowledge and experience gained from this study will

be an added value for this organization as no general valuation was performed for the last 33

years. The importance of quality control and assurance has always been appreciated by the DLS

and in the following general valuation adequate time and resource will be dedicated to perform

such studies. The results should be evaluated and corrections should be made where necessary

before any publication of results. This will secure that the assessment will be fair and equitable

for the taxpayers.


8. Recommendations

A number of recommendations have been put forward by the DLS that can be implemented in

short to medium term planning so that the quality of the present general valuation can be

improved as well as the future one. The present general valuation can be improved within the

framework of reassessing a number of geographical areas both in urban and rural areas. These

areas are under review within the process of lodging applications by owners for correction of

errors or valuation objections in respect of the recent general valuation.

Part of the recommendations is common with those already described in the first report namely

«The study on refining the parameters on the CAMA model» as the data used for the statistical

analysis and the ratio analysis are the same.

8.1 Short term planning

Investigate alternative but reliable methodologies to increase the number of observations for a

future ratio analysis due to the very limited number of sale transactions in the property

market.

Further investigation and analysis of sale transactions where the declared and accepted price

is beyond certain percentage.

Further analysis is needed for the shared ownership sales by property type, bearing in mind

the limited number of sales available for analysis.

Need to prepare specific export functions in CILIS, that users will be able to extract

information easily and quickly as regards sale transactions and their respective property

characteristics in conjunction with the recent GV. Also, GIS applications should also be used

in all stages of GV process of ratio studies. Investigate the problem as regards a field in the data set extracted from CILIS that cannot be

recognized as “date” field and thus additional effort was needed to convert this field into time

quarters in order to proceed with the time adjustment in the future.

Application of the unofficial land index produced by the CBC, when available for the purpose

of performing a variance analysis. This will enable the DLS to select sales beyond one year

before and after the crucial date and thus increasing considerably the number of observations

as well as the representativeness of the population. This is assumed to be available in

February 2015. Concurrently, the CBC Residential Property Price Index can also be used to

time adjust the sales for flats and houses in the same way as with land index. The CBC

Residential Property Price Index is a high level index at district level, which is not reflecting

price changes at lower level, thus the DLS will investigate the possibility to produce its own

price index at lower level.

Assess the importance of collecting certain additional property characteristics. Additionally,

assess the quality of recorded property characteristics and employ new or improved

procedures, where necessary for quality control and assurance. Where necessary to issue

circulars and directions at district offices as regards recording and verifying/validating sale

transactions on a daily basis including market research and inspection of sold properties.

Establish the legal basis under Cap 224, for compulsory self-declaration of property

characteristics of new buildings or changes in the existing status and imposing administrative

fines for non-compliance. Similar legislation is applied at the Spanish Directorate for

Cadastre – as noted during DLS mission to Spain

Fully utilize and apply GIS in performing the valuation quality control

Reinforce the collaboration between the DLS, the Central Bank of Cyprus and the Statistics

Department in the sphere of statistical analysis and business issues.


8.2 Medium term planning

Assess the introduction of modern technologies in data capture processes and updating (field

data capture with tablets pc or ipads).

The PRD assessment in this study has indicated small regressivity in some cases and

according to IAAO standard this may be due to the small number of observations.

Furthermore, referring to Gloudemans (IAAO, 2011) Fundamentals of Mass Appraisal, is

noted that «both regressive and progressive PRDs can result from misclassifications or

systematic problems in appraisal schedules or techniques. Outdated appraisals, can also

contribute to regressivity. The PRD obtained from a sample of ratios, provides only an

indication of Price-Related Bias (PRB). When sample sizes are small, PRDs outside the

acceptable range may be due to sampling error. Also the weighted mean and thus the PRD

can be heavily influenced by outlier ratios on one or more high value properties». According

to IAAO Standard4 «the coefficient of price-related biased (PRB) provides a more meaningful

measure of Price Related Bias. It is obtained by regressing percentage difference from the

median ratio on percentage difference in value». The DLS will further investigate this

additional measure, although this can be overpassed by increasing the number of

observations.

At this point in time, at district level all agricultural areas and some primary commercial areas

are under investigation as regards the determination of micro-locations. Values that deviate

significantly within the same planning zone are re-examined. The micro-location approach

needs to be decided after thorough investigation and analysis. Thereafter there is a need to

initiate a project to digitize specific geographical areas. This is considered as one of the most

significant projects that will improve the quality of the general valuation at present as well as

in the future.

Fully utilize and apply GIS in performing quality assurance and quality control in the variance

analysis (ratio studies).

4 IAAO Standard on ratio studies, April, 2013 (page 29)


Glossary

Adjusted sale price: The sale price that results from adjustments made to the stated sale price to

account for the effects of time, personal property, financing, or the like.

Arithmetic mean: A measure of central tendency. The result of adding all the values of a

variable and dividing by the number of values.

Computer-assisted mass appraisal (CAMA). A process that uses a system of integrated components and

software tools necessary to support the appraisal of a universe of properties through the use of mathematical

models that represent the relationship between property values and supply/demand factors.

Coefficient of dispersion (COD): The average deviation of a group of numbers from the

median expressed as a percentage of the median. In ratio studies, the average percentage

deviation from the median ratio.

Coefficient of variation (COV): A standard statistical measure of the relative dispersion of the

sample data about the mean of the data; the standard deviation expressed as a percentage of the

mean.

Coefficient of price-related bias (PRB). An index of price-related bias obtained by regressing

percentage deviations from the median ratio on percentage changes in a value proxy, which is

obtained by giving equal weight to assessments and sales prices so as to minimize measurement

biases.

Confidence interval: A range of values, calculated from the sample observations, that are

believed, with a particular probability, to contain the true population parameter (mean, median,

COD). The confidence interval is not a measure of precision for the sample statistic or point

estimate, but a measure of the precision of the sampling process (see reliability).

Confidence level: The degree of probability associated with a statistical test or confidence

interval, commonly 90, 95, or 99 %. For example, a 95 % confidence interval implies that were

the estimation process repeated again and again, then 95% of the calculated intervals would be

expected to contain the true population measure (such as the median, mean, or COD).

Median: A measure of central tendency. The value of the middle item in an uneven number of

items arranged or arrayed according to size; the arithmetic average of the two central items in an

even number of items similarly arranged.

Outliers: Observations that have unusual values, that is, differ markedly from a measure of

central tendency. Some outliers occur naturally; others are due to data errors.

Price-related differential (PRD): The mean divided by the weighted mean. The statistic has a

slight bias upward. Price-related differentials above 1.03 tend to indicate assessment regressivity;

price-related differentials below 0.98 tend to indicate assessment progressivity.

Reliability: In a sampling process, the extent to which the process yields consistent population

estimates. Ratio studies typically are based on samples. Statistics derived from these samples

may be more or less likely to reflect the true condition in the population depending on the

reliability of the sample. Representativeness, sample size, and sample uniformity all contribute to


reliability. Formally, reliability is measured by sampling error or the width of the confidence

interval at a specific confidence level relative to the central tendency measure.

Skewed: The quality of a frequency distribution that makes it asymmetrical. Distributions with

longer tails on the right than on the left are said to be skewed to the right or to be positively

skewed. Distributions with longer tails to the left are said to be skewed to the left or to be

negatively skewed.

References

Standard on Ratio Studies (IAAO: April 2013)

Fundamentals of Mass Appraisal (IAAO: 2011)

Documents

APPRAISAL LEVEL (Median Ratio) - LARNACA DISTRICT AND ALL ... · There is an inherent limitation of a small number of observations in this study and as noted by the IAAO standard,