Vulture funds at the ready as government to auction citizens' homes at super-low prices

29/4/2014

Significant changes are to be implemented over the auctions of the homes and properties of those with outstanding debts to the state. The properties of those with unpaid taxes will now be auctioned off at prices as low as one third of their 'objective values' meaning their owners in many cases will suffer major losses. The changes have been described as 'deeply unethical' by pro-market MEP Theodoros Skylakakis.
The reform of the system to auction the properties of those with outstanding debts to the state are included in the European Commission’s latest evaluation of the implementation of the Memorandum Agreement and comes following an agreement between the Finance Ministry and the troika.

The changes are intended to address the fact that today many such auctions of properties do not end in a sale - largely due to the desperate state of the property market. While today there is a mechanism for the government to re-auction properties with lower starting bids in the event that no buyer is found, it requires appealing to the courts following two unsuccessful auctions which often entails many-month delays.

Now the tax office will be able to set the starting bids for properties at one third of their ‘objective values,’ irrespective of the amount in arrears. These are values set by the state based on a number of parameters and are used to calculate tax liabilities etc.

However today in many cases the objective value of a property is far above its market value as the property market has effectively collapsed. The government is unwilling to re-evaluate the objective values as that would reduce its revenue from tax-paying property owners. However its failure to do so means that auctions of properties with starting prices set at the objective value (as was the law until now) often fail to attract any buyers.

In other words the change will allow the tax office to use one value to determine the property tax owed by a taxpayer, and another - far lower - value to sell their home in the event that they cannot pay the taxes owed. It is just the latest attempt of the Finance Ministry to boost revenue from a population that is reeling. In the event that the first auction of a property has no buyer then subsequent auctions will be set with a starting price at even lower than ⅓ of the objective value.

‘Deeply unethical’ is how MEP and president of the pro-market Drasi party Theodoros Skylakakis has described the changes, saying that it will open the way for various ‘vulture funds’ to purchase real estate assets at obscenely low prices. He notes that the agreement also allows real-estate to be auctioned over debts to the state as low as 500 euros and that the low prices will mean that in some cases the cost of an auction to the state may be greater than the amount gained.

As such the result will be that in many cases citizens will lose valuable real-estate assets for a few thousand euros, and still be on the hook for remaining debts to the state.

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