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BIR Zonal Values (And How To Use It Properly)

So you have announced to the world that you are now a real estate investor, and suddenly, everyone has a property they want to show to you, thinking it’s a good deal because it’s cheap compared to the zonal value… which is often wrong. Let me illustrate…

The problem with BIR zonal values

A friends calls and says “Hey Jay, I found a foreclosed property for sale and I know it’s a bargain!”

“Really?! That’s great, may I ask why it’s a bargain?”I answered with great enthusiasm.

I’m expecting something like an ugly multi-door property in a nice neighborhood, at a ridiculously low price.

My friend quickly answers “Its selling price is way below its zonal value, it’s just a fraction of it!”

I cringe and I begin to explain in a nice way that zonal values and market values are worlds apart…

The real purpose of zonal values

Okay, this may shock you, but keep in mind that:

BIR Zonal Values are purely for taxation purposes only!

They are not an accurate basis in determining a property’s market value.

Paraphrasing what  Engineer Enrico Cruz said to our class during one of his lectures; “From this point onwards, we should forget about zonal values when appraising a property!”.

Simply put, If you’ve found a property with a  selling price that is below the BIR zonal value for that property’s location, it does not follow that the property is a bargain.

On the other hand, if a property’s selling price is higher than the BIR Zonal value for that property’s location, it also does not follow that it is overpriced.

Sometimes, you may find a property with a market value that is equal to its zonal value, but this is very rare.

A better way to determine market value…

Here’s what real estate investors should always remember:

We should always use the real market value in determining if a property is a bargain or not. In other words, you cannot rely on zonal values.

One fairly accurate way of determining market values is by finding comparable properties or comps. To learn more about this, refer to the article on How I estimate the Market Values of foreclosed properties.

Maybe in the future, if the BIR is able to adjust the zonal values to match current market values (yes, the BIR is revising zonal values), and if they can do this fast enough (yes, property market values change with time), then maybe we can use it to determine the market value of a property.

The question is, will the revised zonal values be the same as current market values?

Should we totally forget about BIR zonal values?

Of course not!

BIR zonal values are still important as you will use them to compute for the real estate taxes, that you, either as a buyer or a seller, will pay, when you buy or sell a property. This applies to all properties, foreclosed or otherwise, or even as you own a property in the form of real property taxes (RPT).

This is part of due diligence and aims to mitigate just one of the risks of real estate investing, like paying too much for a property by not considering expenses like real estate taxes.

Let me reiterate BIR zonal values to determine a property’s market value… they are not the same!

Where to get BIR zonal values

Now that you know that zonal values are meant for taxation purposes, here’s the link to the BIR zonal values in BIR’s official website:

==> Click to view BIR Zonal Values in BIR’s official website (opens in new window)

Will zonal values become accurate?

In the future, it’s possible that zonal values might become accurate enough to serve as a good enough reference for actual market values…

But we don’t have a crystal ball that can predict when this will happen, or if this will even happen at all.

You have to be very observant and see if the the market values in your target location are moving closer to the zonal values.

You also have to be vigilant if/when the BIR has plans to adjust zonal values in your location.

Personally, I noticed that the zonal values in my target locations are still significantly below the market values we have observed (Las Pinas, Antipolo, Marikina, and Quezon City). How about you? Let me know in the comments.

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About Jay Castillo
People encounter problems and make mistakes when buying foreclosed properties, and Jay wants to help people avoid those problems/ mistakes. Jay encountered a lot of those, which is why he started this blog in 2008 to serve as a guide where he shares lessons learned, and how to overcome challenges you may encounter when investing foreclosed properties in the Philippines … [Read more]
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22 thoughts on “BIR Zonal Values (And How To Use It Properly)”

  1. good morning sir. Tanong ko lang po. why the zonal value of BIR is different from the zonal value of city assessors office? upon checking my documents like dito sa cebu sa place ko bir zonal value is 21,184.00 while city assessors office zonal value is 5,614.00. Plano namin benta property pero yong buyer based sa kanyang research city assessors office zonal value gusto nya instead of bir kasi hindi daw accurate like sa content mo sir. Any thoughts sir? Thank you po!

    Reply
    • Hi Geraldine,

      Yung tawag sa value na ginagamit ng city assessor (yung nakalagay sa tax declaration) ay Fair Market Value, iba yon sa ginagamit ng BIR na Zonal Value.

      Take note, ang FMV ay hindi rin accurate na basehan ng actual market value para gawing basehan ng presyo kung magbebenta or bibili ng property.

      Tsaka kagaya po ng nabanggit ko sa article sa taas, ang zonal value ay hindi rin magandang basehan ng presyo kung magbebenta or bibili ng property. For taxation lang ang BIR zonal value.

      Suggestion ko sa buyer niyo, ipa-appraise yung property niyo sa isang licensed real estate appraiser para malaman ang accurate and updated market value.

      Good luck Geraldine!

      Reply
  2. Hello Everybody,

    For inputs lang, I have a senior citizen friend who wants to give their property to two of their children, We already seek advice from a lawyer, we were advice to have a deed of sale instead of deed of donation, With this, I am asking you guys would it be ok. if they sell the property to their heirs under the zonal value price? Who will be the one to
    decide how much they will sell it?

    Thanks

    Reply
  3. Hello Jay!

    May i ask if u happen to know what government/local office/or any site where you can find a list of sold real estates properties and their sold prices within a city?

    Thank you

    Reply
    • Hi Vandolf, unfortunately, I haven’t found any website like that, I wish there was. I heard they have something like this in the US, and I really hope that the Philippines will have something similar soon.

      Reply
  4. Why is FMV in manila is way too low compared to Zonal Value? for example: In Taft Ave vito cruz (One Archer’s place condo) FMV for a particular 25 sq meter condo is 900K but the zonal value is is ZV =122.5K/sq meter? so Zonal Value =122.5K/sq m X 25 sq m. meter = 3M? why is there such huge difference? another is a condo in sta mesa, Sorrel Residence,, ZV is 75K/sq meter so a 1 BR 38 sq meter has ZV=75K X 38 sq.m = 2.85M. where as its FMV as per tax dec is only 1.25M? is there anyway to reflect FMV or Selling price as reference for CGT computation?

    Reply
    • Hi Mr. Roberto, I believe the both FMV on the tax dec and/or the Zonal Values from the BIR are outdated which results in a huge difference. In fairness, this is one of the goals of the TRAIN Law, to update for form the LGU level (for the FMV’s) and also with the BIR (the zonal values) but this will take a long time to do, and both are like moving targets.

      With regard to reflecting the FMV or selling price for computation of CGT, that can only happen if they are higher than BIR’s zonal values. 🙁

      Reply
  5. Pingback: Real Estate Acronyms Every New Real Estate Investor Should Know
  6. Hi Jay, can I ask a question. If for example there’s a property I’m interested in and in the neighborhood a mall is about to be constructed, the value will naturally go up eventually. Will the zonal value and/or market values go up before the mall is completed and people will foresee the property to be more valuable or will properties in the neighborhood go up only when the mall is done? Thank you!

    Reply
  7. May I ask some questions regarding the assess value of 2nd class municipality, how much is the assessed value per square meter the following three (3) querries, to wit:

    1. Warehouse?
    2. Residential dwelling unit? Bare? Without interior finishing?
    3. Commercial building, groundfloor only, and multiple storey building?

    Thanks abd hoping for your favidabke action to my querries.

    Reply
  8. Hi Jay! Thank you for your kind instruction. I can understand what zonal valuation means to real transaction. Here is one question however, If there is huge difference between zonal value and real price, let’s say about land which zonal value is P100000 per square meter and seller’s price is P200000 what can I think about this differece? Isn’t it too expensive? I know I should check comparable properties price but some specialist of real property investment said zonal value of BIR can be benchmarks of real transaction. I am little bit confused. I’m so glad if you tell me some advise. Thank you.

    Reply
    • Hi Kei! seems Jay is busy so let me answer your question… I think you need not worry much about the difference be it too big for you to imagine because you cannot just do anything but to follow the BIR Zonal, at least for tax payment purposes only. It cannot dictate the real market value of a property. Well, if you are the seller of the property and you sold it twice as much as it’s zonal value then good for you isn’t it? And if you are the buyer in the same situation then just let the seller pay his duty like Capital Gains Tax or you may ask him to include Documentary Expense based on BIR zonal which is cheaper — for your advantage, right? Goodluck to you!

      Reply
    • The most common factor in appraising property is based on zonal values multiplied to three and depending on property conditions eg. flood zone, proximity to access roads, proximity to public transportation, neighbor class, recreation and area development; this will help one to decide whether it is a good price or over priced property.

      An area that has a zonal value of P85,000 per square meter; can sell property at P170,000 or more. If one wants a faster sale then just use price according to zonal value and make an agreement of ‘of net’. ‘Of net’ means the buyer shoulders everything like capital gains tax.

      Reply
  9. Hi Jay! I’m a regular follower of your very informative blogs. Thank You! pls let me answer Ms Cherilyn’s question?
    –Yes, as per BIR laws, a property to be classified as ‘agricultural’ should atleast be 1000 sq.m., so 999 sq.m is a ‘residential’ as per Tax Declaration which would mean higher tax considerations in favor of the Agency. I strongly oppose it because it is unjustifiable at times but it’s their law. ha! ha! ha! However, the advantage of it being classified as residential is that it can be mortgaged with some government agencies like Pag-ibig, GSIS or Banks, which, in some cases, cannot be done with ‘agricultural’ classifications. Also the mortgage value is higher. thanks!

    Reply
  10. Hi Mr. Jay Castillo! A friend told me that in order for a property to be considered as an agricultural for its zonal value, it should be more than 1000sq m… Is this true? We have a property which measures 555sq m which includes mango trees and a small piggery and he says it should will be considered as residential by the assessor. Is there a minimum lot area to have it considered as agricultural with regards to its zonal value?

    Reply
  11. what are the taxes to be paid aside from cap. gains and doc. stamps if the property sold is inherited from deceased?

    Reply
  12. Hi Robi, the real property tax is the tax due based on the actual use, assessment level, and assessed value, which are written on the tax declaration, aside from the fair market value of the land or the building.

    Reply
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