Valuation of a usufruct 2.0
The Administration’s internal instruction and the Ruling Commission’s glorified method are certainly not an end point but only a part of the process. The authors themselves have warned about this for many years. The Ruling Commission’s method is also not quite correct yet. As mentioned above, its usufruct valuations are often too low and there is still no guaranteed equality between returns. This new vision on valuations of a usufruct paves the way for new valuation methods that take into account the equality of returns. Several authors already predicted the inevitable demise of the Ruysseveldt method and prepared themselves for the future. The Spartax method is an example of a method that takes into account the similarity and comparability of returns.
It should not be forgotten that usufruct valuations do not only consider the fiscal aspect. In practice, valuations are carried out in conjunction with the matrimonial property regime. When a usufruct is initially valuated incorrectly, it can create very serious problems in the future. In other words, valuations go beyond taxation and are also affected by other branches of law.
So the question to ask in 2018 is to determine whether a usufruct still makes sense, and if it does, how do we valuate? To provide a full answer would be beyond the scope of this article. However, many technical elements will need to be taken into account (e.g. impact on rental value, additional expenses, etc.). “Valuations are hard work”, and will always be. Simply entering some numbers in an Excel file offers no guarantee of a correct valuation. The real estate market itself also has a considerable impact on valuations. One example is the rise in land prices in Ghent city centre which have a huge impact on valuations. We can describe the situation as follows: people invest massively in real estate in Ghent because the returns from savings accounts today are practically nil. This investment rush causes the price of real estate in Ghent to soar while the rental values remain stable. Rental yields decrease causing valuations to decrease as well. Another example is the crash of the Antwerp rental market. Rental prices decreased significantly while purchase prices remained stable. Rental yields decreased, resulting in decreased valuations of the usufruct. In such situations, the question must be asked as to whether usufruct is still the best option and whether the property tax specialist should find other solutions.
Property planning of the future
It is clear that property planning finds itself in turbulent waters. It was already predicted that the historical methods for usufruct valuations would end up not being immune to rejection and this has indeed been the case. Although property taxation has already been extensively overhauled, the question arises as to whether or not the biggest revolutions are still to come. The property tax specialist must ensure that he is properly equipped to tackle the issue. The current fuss is likely to be a hothouse for future ideas.
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