MoneyTimes, March 6, 2013

Posted by Jill Kerby on March 06 2013 @ 09:00




Every property owner will be receiving the local property tax (LPT) estimate and guideline from the Revenue Commissioners starting next week


Accepting the Revenue’s estimate means they’ll leave you alone once you’ve paid the tax (returns must be made by May 7 or 28 depending on whether you file by post or online; the half year payment must be made by July) and the valuation will last until November 2016. The LPT is being described as a ‘self-assessment’ tax, but rejecting the Revenue’s estimate and submitting a lower one could leave you open to penalties and sanction if it is rejected.


So how should you go about the self-valuation?


Mortgage brokers, financial advisors, economists and estate agents all say that it is difficult to assess the real value of any property in a market that is less than one-tenth the size it was before 2007-8. Mortgage finance, they say, is still extremely difficult to secure, the arrears problem is a price dampener, and a flood of foreclosed buy-to-let properties could be imminent, which could also have a negative effect on prices.  Outside of Dublin, prices are still falling, though at a much slower rate.


Nevertheless, there are ways to self-assess your property, they say, though not all of them may end up being included in the Revenue guidelines.


Independent Valuation


“First, anyone who submits a lower valuation than the Revenue’s, should get professional backup in the form of two or three independent written valuations,” said one advisor. “In Dublin that will probably cost you between €100-€150 for each one, maybe less down the country. It has to be worth at least €300-€400 in annual tax savings for it to make sense to do so.”

 He also suggests that you hire those who turn over the most property in your town or area. “This is never more important given the small sample of transactions these days.”


The National Property Price Register 


Next, check out historical sales on the new property register, which is most easily accessed via the www.myhome.ie website which also includes a simple tax calculator.

Prices achieved since 2010 are listed on the Registrar, but those recorded in the last six months or year are more representative. Prices can vary a great deal as your radius of study widens. The desireability of certain locations differs as does the size, age, condition and type of house/apartment.

Also keep in mind that while neighbourhood amenities are something that everyone shares and so should have the same weighting for LPT values, the fact that you happened to spend €50,000 on a kitchen back in 2006 may not have the same price value impact in this market than it did back then.


CSO Surveys

The monthly Central Statistic Office’s residential price index (go to www.cso.ie) surveys give a snapshot of monthly price changes and the annual price to date. Last January, for example, prices fell, nationally by just 0.6% but in the year to January, by 3.3%. In Dublin, prices rose by 0.5% in January and, in the year to January, by 2.1%.

 This survey, and annual ones like the www.daft.ie and www.myhome.ie county by county price surveys can also provide you with statistical data to back up a price fall, for example, if you believe that the Revenue may have not taken such data into account in their estimate of your home’s value.


Rental Values

 Professional landlords and investors use a mathematical formula that involves the rental yield of a property to gauge whether the asking price represents good value, and this is also a tool you could use to try and value your home.

 It involves taking the annual rent currently being achieved for a house or apartment in your neighbourhood or area (Daft.ie is a good source or go an ask your renting neighbour). Investors then multiply this amount by a factor that represents – for them - a reasonable period in which to recoup their capital.

Typically, this is 12-15 years.  For example, if you know that the property rents for €1,000 a month or €12,000 a year, when multiplier is done, a fair investment value might be between €144,000 and €180,000. Would the Revenue accept this formula for an owner-occupier?  Would a higher multiplier, of say, 20 (once a typical mortgage period) be more acceptable. Using our €1000 a month rent formula, the house would have a valuation of €240,000.


The Ronan Lyon’s Calculation

Last January, in the form of an open letter to the government, the economist and Daft.ie spokesperson Ronan Lyons (see www.ronanlyons.com )

published his own valuation model, based on previous site value/Land Registry data that he produced.

 “The starting point (a 3-bed semi-d in Louth) and then multiply it by whatever factors you need” and supplied in his county-by-country table.

 “In particular, pick your county or urban area, if different; and pick your property type and size. So for a four-bed bungalow in Sligo, the €108,000 starting point is multiplied by 0.875 (prices in Sligo relative to Louth), by 1.355 (prices for 4-beds compared to 3-beds) and 1.221 (prices for bungalows, compared to semi-ds). Multiplying them all together gives an estimate of the property’s value in Q4 2012: roughly €156,000.”  Try it yourself.

 “Valuing houses in this market is guesswork,” one property expert told me. “But this is about getting households registered and €500 million collected. It’s not about a proper source of funding for local authorities.” 

 Owner beware, indeed.

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