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saturday2014

New Build - Rateable Value

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Hi

I'm currently looking at new builds in the Lisburn area. I have come across one that I like which is in quite a nice development in quite a nice part of the town.

Market price is 145k. Rateable value is 125k.

Just wondering is this a big red flag? Or do I need to consider that it is turn key and a nice end of town.

Any opinions would be greatly appreciated.

Thanks

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for a new build it is a bit hit and miss.

The actual rateable value is calculated later after the house if fully complete. The Estate agent may, if asked guestimate the RV from a similar property. If it is a nice development the selling prices may be above rateable value for that general area. you will get the opposite in other areas.

Edited by BelfastVI

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Just be aware that new builds lose value because of the "new build premium" as soon as you move in.

RICS acknowledge this in their Red Book.

Pretty much every UK bank also limits LTV on new builds because of this.

So a N.I. bank might lend you 90% LTV but a the max from an English bank/ Building Society will be 85%.

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Just be aware that new builds lose value because of the "new build premium" as soon as you move in.

RICS acknowledge this in their Red Book.

Pretty much every UK bank also limits LTV on new builds because of this.

So a N.I. bank might lend you 90% LTV but a the max from an English bank/ Building Society will be 85%.

Can you highlight the bit in the Red Book that you are referring to? the Red Book is clear that you have to value the property at what it will sell at and you cannot, under Red Book inflate that value just because it is new.

I don't see any evidence of New Build falling any faster than existing stock during the crash, or rising any slower during the boom. It always amazed me that an 30 year old house, in the same location could be at the same price as a brand new house but this is often the case. Quite often I am marking my prices against resales rather than other new builds.

The new build limit on LtV in England, was brought in because of a price fixing of apartments where the headline price of say £200k was recorded but 'incentives' and discounts were used to allow the purchaser to pay say £180k. The properties were registered in LR at £200k and this allowed the valuers to continue to value at £200k. it looked like a nice little ring and meant that the purchaser could borrow at 90% yet require no deposit. Lloyd's, i think introduced the policy of 90% LtV on new houses and 85% on apartments and the CML introduced an Incentive disclosure document which the purchasing Solicitor had also to agree to. This actually works very well.

There is no evidence of this practice operating in NI at all and therefore the local banks and building societies didn't see the need to introduce the policy here. There is no 'Headline price' in Northern Ireland. The price is the price here.

In the UK, with the Help to Buy and other schemes 95% loans are available for new build and second hand alike from many of the banks.

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Can you highlight the bit in the Red Book that you are referring to? the Red Book is clear that you have to value the property at what it will sell at and you cannot, under Red Book inflate that value just because it is new.

I've actually posted you a few links before on this. Search the site.

The RICS site has a search function. You should be able to find the sections easily enough.

I'm sorry but are you disputing that the new build premium exists?

Are you saing that every English bBank, Building Society, mortgage broker, EA and surveyor are making it up?

I don't see any evidence of New Build falling any faster than existing stock during the crash, or rising any slower during the boom. It always amazed me that an 30 year old house, in the same location could be at the same price as a brand new house but this is often the case. Quite often I am marking my prices against resales rather than other new builds.

Old house, bigger rooms, bigger garden. Better build though less well insulated. Not surrounded or overlooked. Character. Sound proofing.

The new build limit on LtV in England, was brought in because of a price fixing of apartments where the headline price of say £200k was recorded but 'incentives' and discounts were used to allow the purchaser to pay say £180k. The properties were registered in LR at £200k and this allowed the valuers to continue to value at £200k. it looked like a nice little ring and meant that the purchaser could borrow at 90% yet require no deposit. Lloyd's, i think introduced the policy of 90% LtV on new houses and 85% on apartments and the CML introduced an Incentive disclosure document which the purchasing Solicitor had also to agree to. This actually works very well.

I think most said they couldn't trust the valuations. At least that's what Nationwide said.

No it only applys to houses build by Barretts and Taylor Wimpey.

Max LTV is still 80% on new builds because of the RICS recognised new build premium.

There is no evidence of this practice operating in NI at all and therefore the local banks and building societies didn't see the need to introduce the policy here. There is no 'Headline price' in Northern Ireland. The price is the price here.

Perhaps not having access to sold price LR figures hinders transparency here.

Could have gone on but we can't easily find out.

In the UK, with the Help to Buy and other schemes 95% loans are available for new build and second hand alike from many of the banks.

That's shared equity BVI and you know it.

The bank still gets it 75% LTV. Just not from the buyer.

Edited by 2buyornot2buy

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I am not denying that many of the UK lenders operate a different LtV for new build compared to second hand sale houses in recent years.

You say "Max LTV is still 80% on new builds because of the RICS recognised new build premium." I dont agree with this. It's the individual banks policy on what Loan to Value they lend at and not the RICS's. Halifax for example lends upto 90% on Newbuild (not H2B) My link. I understand they are still at 85% max for apartments.

Resales are not necessary equipped with 'bigger rooms, bigger garden, better build though less well insulated as highlighted in your post. Nor are they necessarily 'not surrounded or overlooked'. Character sometimes but the 1970's killed most of that and Sound proofing was a joke. In fact I would argue against most if not all the above.

You only have to look at the houses removed recently from Donegal Road area and what they are being replaced with. Internal toilets for one. The new houses are larger, better build, larger gardens and built to a lower density with better sound insulation.

I think people forget that the resale properties, which have no 'new build premium' in the UK includes houses built in 2012, 2011, 2010 etc. How can you claim they are any better than a brand new one with the full 10 year warranty.

My understanding this has more to do with set prices and incentives in new build compared to competitive bidding in the resale market.

I searched the RICS website and found one section on 'Valuation of Individual New-Build Homes' RICS link. The contents mention nothing about any premium or lower value. The detail is members only so I would be grateful if you could post the section on the Red Book that deals with this.

I dont understand how not having access to the LR figures here in NI influenced the lenders here not to impose a lower LtV for Newbuild, if that's what you are implying.

I am not aware of any 'Headline Prices' taking place in the NI market. It was not a term or practice that was used here. In England, even during the boom times the Headline Price was never paid. People always got discount or sometimes carpets etc up to 10 or 15% off the price. I cant think of one site or developer or agent who used that practice here. Certainly during the crash prices were chipped in both new and resale, but thats a different matter and the house was registered at the agreed price. If it had of been happening here the lenders would have taken a similar approach to the lenders in the UK.

If this was always the case, that "that new builds lose value as soon as you move in", as you claim, then we should have thousands of examples to present over that last 30 years or so.

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I am not denying that many of the UK lenders operate a different LtV for new build compared to second hand sale houses in recent years.

You say "Max LTV is still 80% on new builds because of the RICS recognised new build premium." I dont agree with this. It's the individual banks policy on what Loan to Value they lend at and not the RICS's. Halifax for example lends upto 90% on Newbuild (not H2B) My link. I understand they are still at 85% max for apartments.

Resales are not necessary equipped with 'bigger rooms, bigger garden, better build though less well insulated as highlighted in your post. Nor are they necessarily 'not surrounded or overlooked'. Character sometimes but the 1970's killed most of that and Sound proofing was a joke. In fact I would argue against most if not all the above.

You only have to look at the houses removed recently from Donegal Road area and what they are being replaced with. Internal toilets for one. The new houses are larger, better build, larger gardens and built to a lower density with better sound insulation.

I think people forget that the resale properties, which have no 'new build premium' in the UK includes houses built in 2012, 2011, 2010 etc. How can you claim they are any better than a brand new one with the full 10 year warranty.

My understanding this has more to do with set prices and incentives in new build compared to competitive bidding in the resale market.

I searched the RICS website and found one section on 'Valuation of Individual New-Build Homes' RICS link. The contents mention nothing about any premium or lower value. The detail is members only so I would be grateful if you could post the section on the Red Book that deals with this.

I dont understand how not having access to the LR figures here in NI influenced the lenders here not to impose a lower LtV for Newbuild, if that's what you are implying.

I am not aware of any 'Headline Prices' taking place in the NI market. It was not a term or practice that was used here. In England, even during the boom times the Headline Price was never paid. People always got discount or sometimes carpets etc up to 10 or 15% off the price. I cant think of one site or developer or agent who used that practice here. Certainly during the crash prices were chipped in both new and resale, but thats a different matter and the house was registered at the agreed price. If it had of been happening here the lenders would have taken a similar approach to the lenders in the UK.

If this was always the case, that "that new builds lose value as soon as you move in", as you claim, then we should have thousands of examples to present over that last 30 years or so.

Sorry BVI I don't have time to reply to each point now.

Is there no information on Iconnect on "Assessing a new-build premium"?

BTW Halifax only offers 90% LTV on Barrett Homes and Taylor homes? Do they operate here?

80 LTV is the max on new builds in NI with Halifax.

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Sorry BVI I don't have time to reply to each point now.

Is there no information on Iconnect on "Assessing a new-build premium"?

BTW Halifax only offers 90% LTV on Barrett Homes and Taylor homes? Do they operate here?

80 LTV is the max on new builds in NI with Halifax.

It was you that said the Max LTV was 80% for newbuild. This is not the case in NI or the UK, even excluding the Help to Buy which, when it is available in Northern Ireland will not be a shared equity scheme.

When a new house is valued the valuation takes into consideration the value of resale, making allowances for condition etc. The value they come up with should be the value that the house can be sold on the open market.

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It was you that said the Max LTV was 80% for newbuild. This is not the case in NI or the UK, even excluding the Help to Buy which, when it is available in Northern Ireland will not be a shared equity scheme.

When a new house is valued the valuation takes into consideration the value of resale, making allowances for condition etc. The value they come up with should be the value that the house can be sold on the open market.

Max is 80% LTV for Lloyds Group is what I said.

HTB1 is share equity.

HTB2 will guarantee to pay the inevitable shortfall (as a result of the widely acknowledged new build premium) in the event of repossessions. The lender has no risk here. They can offer any LTV they like because they won’t be paying.

For standard sales, 85% LTV is the max available from an English Bank/ Building Society.

Do you not believe a premium exists or do you not believe it exists in N.I?

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Max is 80% LTV for Lloyds Group is what I said.

HTB1 is share equity.

HTB2 will guarantee to pay the inevitable shortfall (as a result of the widely acknowledged new build premium) in the event of repossessions. The lender has no risk here. They can offer any LTV they like because they won’t be paying.

For standard sales, 85% LTV is the max available from an English Bank/ Building Society.

Do you not believe a premium exists or do you not believe it exists in N.I?

HTB1 is not and wont be available in NI.

HTB2 is a guarantee scheme as you say.

There is nothing 'inevitable' about any shortfall in new build prices. I imagine they rise and fall in line with the general market. I would argue that a newbuild should be worth more than the exact same house build say 20 years earlier to the regulations that existed at that time.

The cause or reason for the difference in the LTV policy of the UK lenders did not, as far as I am aware, occur in NI. If it did the NI lenders would have followed the UK policy. The UK companies are not going to make an exception for what is 3% of the market.

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New build premium is about the house automatically losing value in the short-mid-term when you move into the house.

Why would I buy a say phase 3 houses from a developer at 150k when I can buy a resell house from phase 1 at 130K.

Just look at bracken hill, coopers mill or any number of new developments in Musgrave. All resale’s at less than the developer’s current phase or not selling.

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New build premium is about the house automatically losing value in the short-mid-term when you move into the house.

Why would I buy a say phase 3 houses from a developer at 150k when I can buy a resell house from phase 1 at 130K.

Just look at bracken hill, coopers mill or any number of new developments in Musgrave. All resale’s at less than the developer’s current phase or not selling.

I equally would not pay £20k, £10k or even £5k for a house just because it was a few months or even a year newer than the exact same house. I would not expect anyone else either.

If there was 15 or 20 years and the older house had wooden windows and fascia than needed replacing etc then that is a different matter. The construction standards, less maintenance and energy efficiency are also items that are worth paying extra for or a premium above the exact same 15 year old house. That doesn't disappear the next day, week or even year. Your new or new house should continue to hold an increased value or premium over the exact same house next door which was build 15 years earlier. The difference will reduce as both begin to age and at that stage someone may be willing to pay more for the same house brand new.

Cars are different as they depreciate with age and you pay VAT on a new car not a second hand one. So the minute you drive out of the showroom the resale value is lower.

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