The subject of Local property tax was brought up a the Irish national flood form in October and there was some discussion on how flooding would potentially impact the amount of tax to pay.
Disclaimer : I’m not a tax or valuation expert – so please don’t take this as professional advice – but merely as perspective. 🙂
During the Irish National Flood Forum Conference, Jer Buckley, advised homeowners to take flooding impacts into consideration during their assessments. “The property tax is a self assessment scheme.In other-words one makes there own declaration.You submit the value based on houses that are similar in your area.”
What is LPT and how does it work?
Local Property Tax (LPT) is an annual self-assessed tax charged on the market value of all residential properties in the State came into effect in 2013 and is being administered by Revenue.
On the LPT Website it states
While first valuation date for LPT was 1 May 2013 and any valuation of a property set on that date is valid until 31 October 2016. The valuation is not affected by any repairs or improvements made to a property or by any general increase or decrease in property prices that might occur during the valuation period.
I assume this means to give homeowners stability against spikes in the property market. The website continues:
Section 35(5) of the Act does however provide for the submission of a revised LPT Return in advance of the next valuation date where specific information or documentation supporting such a change comes to hand, or where the purchaser feels that the original valuation (by the vendor) could not have been reasonably arrived at. Supporting documentation in this regard could include a copy of a professional valuation or documented information on property sales for comparable properties in the local area. The supporting documentation must be relevant to the valuation date (1 May 2013) rather than to current property values.
Here in South Galway, I think that after the flooding events of 2009 we all assured that the corresponding weather conditions were a 1 in 200 year event. Post 2013, we can seen now that this has not been the case (in 2014 and 2015/2016) so it therefore seems reasonable (and mandatory) that people affected by flooding should be able to reflect the reduced value of their property to a reduced LPT return. Of course if a house is flooded (requires pumps) etc, then it should be exempt from tax. (Minister urged to exempt flooded houses from property tax)
I asked some of our local estate agents and chartered surveyors in Galway about the impact of flooding on house values.
By Austin McInerney
The value of ones home is not just numerical but also intrinsic in the happiness that come with a family unit. Home is to be enjoyable, warm and safe. So when your home becomes subject to the threat of flooding, then the happiness and safety is now itself in trouble.
As a Chartered Surveyor in south Galway and North Clare, I am often tasked to value homes for a variety of purposes be it simple market value, for separation proposes, property tax, probate and more often in an improving market Mortgage purposes.
When valuing, one of the main concepts a Surveyor must work with is the Open Market Value ethos … an open, free market with willing vendors and willing buyers.
This process must take in all positives of the home such as location, quality, size, presentation etc.. and it therefore follows we must take in the negatives which include the exact same criteria which often includes for example the fact that the property is close to Slatted sheds…a motorway or perhaps there is small rooms, poor quality windows etc etc but when you introduce the ‘F’ word into the mix the whole process of evaluating a home is thrown up in the air…Flooding.
If the house actually floods well then forget about it. Here we are discussing homes that are affected by flooding. This can take 2 forms in our opinion which is
- Directly : Meaning the water levels are coming close to that actual house
- Indirectly : Meaning, the house is not under threat but access is seriously curtailed during flooding periods
We have seen many forms of this with septic tanks rendered useless, flood levels in the lawn and in the worst cases pumping being used to keep the water at bay. The working of the property has been affected.
The open market value of this property will go from a normal open market 100% down to as little as 25% with the only real value being a speculative investor gambling on a rental return and that the house will not actually flood.
There would be hope that promised remedial works etc will alleviate the flooding in time and threat the value of the house will annually improve, but it would only be such an investor that would risk funds on this basis.
So, a 5 bedroom 200 sq.m 10 year old house that should hold a €300,000 value may actually only be worth €75,000. And this also not guaranteed if flood waters are that close.
Another factor that impacts the value is that it may be very difficult to get a mortgate and potential buyers would be limited in cash in hand only and even may just be speculators.
We have witnessed on a few occasions property that are no where near being under threat of flooding but their access to, say, Galway or school or town being seriously curtailed with increased round trips etc required. These homes would still loose some of there normal 100% value as banks providing finance may be reluctant or the buyers themselves holding reservations that they previously never had.
There is no exact numerical figure that can be offered but we do feel, taking comparisons into account that as much as 30% of the value will be lost depending on the seriousness of the access issues.
Buyers are themselves seeking an enjoyable, warm and safe home and if they feel that it is or will be tarnished in any way then they will happily look elsewhere; you then do not have an ‘open market’, if banks are not willing to provide finance due to flooding issues in the vicinity, your ‘open market’ is seriously curtailed further..
Austin McInerney MRICS, MSCSI is a Chartered Surveyor with detailed experience in dealing with flooding valuations for over 25 years. He can be contacted at 091-631078 or 086-8225085
[David Murray again….]
It is very clear that flooding, threat of flooding or removal of services due to flooding impacts the values of homes too varying degree. If your home is devalued by flooding then it seems only right that this devaluation needs to be taken into account during your LPT assessment. If our Government services want full Property tax returns, then they need to ensure that we get a viable flood relief programme in place. Maybe we should wait 100 years before we assess the viability of the solution.
100s-1000s of reductions may not drain the Government coffers but this doesn’t just relate to people that have been affected by flooding.
Consider that fact that Galway County Council, in January 2016, applied for €14m funding to deal with aftermath of flooding and within the same year they are leving the people of all Galway with a 10% increase in Property tax. It would seem these are related.
It seems that the South Galway flooding is affecting everybody as it’s not Galway County Council, OPW or our Government that’s paying the cost of the flooding – it’s you.
(Thanks to Austin for input)