To begin with the government has no business dealing with something better left to the vicissitudes of the market.
Controlling or fixing prices is not only ineffective; worse, it is counterproductive.
Take the case of land pricing. Of course, location, zoning, terrain, and climatic conditions affect real estate prices.
But the government has the final say in the determination of the value of patches of earth.
The problem is worse when different local government units are allowed to have their valuation formulas.
The result is unrealistic, often ridiculous, pricing that discourages land acquisition and development. Consequently, the government loses in terms of forgone real estate tax revenues
With this in mind Sen. Ferdinand Marcos Jr. has proposed a national land valuation system to curb the discretionary powers of local executives in dictating real estate prices.
Marcos noted that 23 agencies and almost 1,300 local government units, along with private appraisers perform land valuation using different methods and standards riddling the real property sector with conflicting and inconsistent real property values.
He said such a condition has prevented the government, both at the local and the national levels, from tapping the potential of the land sector, and resulting in foregone revenues from real property taxes, he said.
“Considered as the main source of locally sourced revenue, the outdated Schedule of Market Values, averaging from 10 to 12 years old, greatly narrowed the LGUs’ real property tax base while increasing inequity in real property taxation,” he was quoted by a broadsheet as saying. .
The senator noted that since most of LGU values no longer reflect the true conditions of the property market, the country’s valuation system has acted as a disincentive for private investors to take a more vibrant role in economic development.
“In the same vein, many government-led projects and investments have been delayed due to just compensation issues and lengthy court litigations,” he said.
Marcos also proposed the strengthening and reorganization of the Bureau of Local Government Finance under the Department of Finance to assume institutional responsibilities for the proposed reforms.
Based on a World Bank study, real property prices in the country are diverse owing to factors such as location, type, and features of the property. The mix of real estate transactions by type also has a bearing on the total price.