ACCC Annual Conference Waterford 2013

“Household Valuations & the new Property Tax”

Edward Carey FSCSI FRICS

Chartered Surveyor & Auctioneer

Context

You are here!

LPT is here!

Agenda

• Property Tax

– What is it– How will it work– Valuations

• House Price Register

Local Property Tax - Operational

• Context • Finance (Local Property Tax) Act 2012, and• Finance (LPT) (Amendment) Act 2013• 159 Sections - 17 Parts• Very few exceptions• Revenue expect significant engagement

Local Property Tax - Operational

• 3 Easy Steps– Compile register of residential properties– Establish register of liable persons– Collect payments

• Replaces Household Charge & NPPR (from ‘14)• Centrally collected & dispersed regionally• Provide for Local Authority funding

Local Property Tax - Operational

• Residential Property– “any building or structure which is in use, or suitable for use, as a dwelling and includes

any shed, outhouse, garage or other building or structure and any yard, garden or other land, appurtenant to or usually enjoyed with that building, save so much of any such yard, garden or other land the exceeds one acre shall not be taken into account for the purposes of this definition”

• Exceptions– New houses up until end 2016– Unsold new houses (“stock-in-trade”)– FTB’s until end 2016– “Ghost estate” properties (not yet defined)– Charitable properties/special needs accommodation– Long term physical or mental disability– Mobile home, vehicle or vessel– Diplomatic properties

• Deferrals– Pyrite damaged homes??– Income limits

Local Property Tax - Operational

• Liable person

– Owner of Irish residential property, irrespective of place of residence– Any person with a >20 yr interest in a property– Local authorities & housing associations– Personal representatives of a deceased owner– Trustees

• Joint ownership

• Ownership dates – 1st May 2013 & 1st November thereafter

Local Property Tax

• Charging Provisions

– Valuation date 1st May 2013 up to 2016– Then 1st November thereafter

• Rates;

– €0 - €100k 0.18% of midpoint– €50k increments up to €1m– €1m, plus 0.18% up to €1m

& 0.25% of excess

• Local authorities can vary by 15%

Local Property Tax - Operational

• Care & management– Revenue

• Register– Revenue

• Returns– Obligation on liable person

• Revenue estimates & assessments

• Appeals

Local Property Tax - Operational

• Deductions at source– By employers & pension providers– Minister for Social Protection– Minister for Agriculture, Food & the Marine– State payments

• Deferrals– Income limits– Personal insolvency (for that period only)– Excessive financial hardship

• Penalties– Max fine of €3,000– Secretaries of bodies €2,000

Local Property Tax – Operational

• Key dates

– March 2013: Issuing of LPT Return forms– 1st May 2013: Valuation & ownership dates– 7th May 2013: Due date for paper filing– 28th May 2013: Due date for electronic returns– 1st July 2013: Commencement date for payments– 15th July 2013: Commencement date for DD’s– 1st November 2016: New valuation & ownership

date

Local Property Tax - Valuations

• RICS Red Book Vs Revenue

• “Market Value”; The estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction wherein the parties had each acted knowledgeably, prudently and without compulsion”

• “Chargeable Value”; in relation to a residential property means the price which the unencumbered fee simple of the property might reasonably be expected to fetch on a sale in the open market in such a manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the property and with the benefit of any easement necessary to afford the same access to the property as would have existed prior to the sale

• Valuing in a vacuum

Local Property Tax - Valuations

• Self Assessment• Revenue valuations?• Revenue guidelines

– Location– Type– Condition– Age– Local services– Comparable evidence

• Sources of information– www.psr.ie– Property websites– Estate agents’ windows– Professional valuation

Local Property Tax - Valuations

• Valuations – Where?– Inspection– Drive-by– Desk-top

• Valuations – How?– Investment (multiple of income)

• eg; €700pm = €8,400pa x 12.5% (8YP) = €100,800

– Replacement cost– Residual method– Comparable evidence

Local Property Tax – Valuations

• Granny flats• Flooding• Living over the shop• Extensions• Legal issues• Planning permission• Local authority properties

A Little Exercise

A Little Exercise

A Little Exercise

A Little Exercise

A Little Exercise

A Little Exercise

A Little Exercise

A Little Exercise

A Little Exercise

• Daft.ie - €85,000

• PSR.ie - €375,000 (‘10 figure)

• Investment method• Say €550pm x 12.5% (8YP) = €52,800

• LPT Liability Variance from €90pa - €675pa

www.scsi.ie

Society of Chartered Surveyors Ireland38 Merrion Square,Dublin 2, IrelandTel: + 353 (0)1 644 5500Email: info@scsi.ie

Dating back to 1895, the Society of Chartered Surveyors Ireland is the independent professional body for Chartered Surveyors working and practicing in Ireland.

Working in partnership with RICS, the pre-eminent Chartered professional body for the construction, land and property sectors around the world, the Society and RICS act in the public interest: setting and maintaining the highest standards of competence and integrity among the profession; and providing impartial, authoritative advice on key issues for business, society and governments worldwide.

Advancing standards in construction, land and property, the Chartered Surveyor professional qualification is the world’s leading qualification when it comes to professional standards. In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining the Chartered Surveyor qualification is the recognised mark of property professionalism.

Members of the profession are typically employed in the construction, land and property markets through private practice, in central and local government, in state agencies, in academic institutions, in business organisations and in non-governmental organisations.

Members’ services are diverse and can include offering strategic advice on the economics, valuation, law, technology, finance and management in all aspects of the construction, land and property industry.

All aspects of the profession, from education through to qualification and the continuing maintenance of the highest professional standards are regulated and overseen through the partnership of the Society of Chartered Surveyors Ireland and RICS, in the public interest.

This valuable partnership with RICS enables access to a worldwide network of research, experience and advice.