In its response to the Department of Finance and Personnel’s Consultation Paper on Decapitilsation Rates for the 2015 Revaluation, business rates experts from the property firm said that the Department’s proposals were flawed for a number of reasons.
Guy Richardson at Colliers International said: “A decision is yet to be made in England, Scotland, and indeed Wales, as to the appropriate decapitalisation rate for the revaluation due to take effect in 2017.
“Decapitalisation rates for the remainder of the UK will be based on future economic circumstances, which are, as yet, unknown – therefore, if NI were to align with the existing rates, there’s a strong risk that such an alignment would only last until 31 March 2017.
He continued: “The proposal also fails to take into account cost inflation since the last revaluation, as well as rental shrinkage in other sectors – this is likely to result in an unfair shift onto the classes of property valued on the Contractor’s Method, namely those in the public sector.”
According to the BCIS All-in Tender Price Index, building costs in NI rose by more than 38% between the first quarters of 2001 and 2013.
“If the proposed decapitalisation rates were adopted, many properties valued on the Contractor’s Method would face an increase in NAV.”
Guy also warned of the increases in liability sustainability for Contractor’s Method properties, which, under the current proposals, could be in excess of 40% – a potentially crippling extra rate burden which will, once again, fall heavily on public sector shoulders.
“It may even carry wider fiscal significance,” added Guy.
This is not the first time rates revaluation proposals have come under criticism from the team at Colliers.
The decisions in 2013 to postpone the planned 2015 revaluations in England, Scotland and Wales was met with resounding criticism from the team and fellow property professionals alike, with John Webber, the Head of Rating, describing the move as, “the final nail in the coffin.”
Guy concluded: “It’s essential for NI to set its own decapitalisation rate in the current circumstances, where its valuation date does not correspond with that applying in the rest of the UK.”