What factors affect value for property in the purchase/sales market Flashcards

1
Q

What influencing factors affect property value?

A

THINK PESTLE!!!

Supply and demand

Location, Accessibility (transport) and Aspect (south-facing garden)

Property Type, Style and Age

Property Size

Planning / Building Regulations

Condition of repair inside and outside

Method of construction

Ownership status – owning the freehold or leasehold is an important factor in value

Environmental factors – susceptibility to flooding = checked with the EA

Energy performance and sustainability - think MEES

Other social, economic and political factors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

How does Supply and Demand affect property value?

A

Economic market principles determine value any commodity will have at particular time

Supply of property = relatively fixed at any one time

Demand, however, can change quickly thus influencing property values

If demand increases and supply = fixed, price of the commodity will rise as more people try to buy

Increases in demand for property stimulate supply (the builders of property) to create more, which takes time meaning prices will rise in the short term

Demand may also be increased by changes in the economic situation of buyers: if they have more income, demand is likely to be stimulated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How does Property Type, Style and Age affect property value?

A

Type of house (detached, terraced, semi-detached etc),

Style (e.g. does the house have a ‘wow’ factor or particular kerb appeal)

Age, such as an older property with historical connections or a newer property with up-to-date fittings, will also affect value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How does Planning / Building Regulations affect property value?

A

Requirement for planning permission (which covers size, shape, design and siting aspects of the property)

Requirement for building regulations (which covers the technical aspects relating to the construction process) approval

Without these, a property may have to be demolished

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What other social, economic and political factors affect property value?

A

Demographics = age, income, and regional preferences of buyers, what percentage are retirees, and what percentage might buy a vacation or second home

Interest rates impact price and demand of real estate: lower rates = more buyers, reflecting lower cost of mortgage, but also expand demand for real estate, which can then drive up prices

Prices often follow cycles of economy, but investors can mitigate risk by buying REITs / other diversified holdings = not tied to economic cycles / can withstand downturns

Government policies and legislation, including tax incentives, deductions, and subsidies can boost / hinder demand for real estate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How might a valuation be undertaken for a private individual in a sale, purchase or transfer?

A

Proposed sale / purchase (particularly where no mortgage is required) / in relation to transfers of property within a family and/or on divorce

Unless requested otherwise, default position = provide market value (VPS 4 paragraph 1.2) in accordance with Red Book

Where property = transferred between connected parties the transfer may be at an agreed rate above or below MV = likely to have tax implications

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What tax should be considered with selling UK land?

A

Capital Gains Tax

Income Tax

VAT Liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is Capital Gains Tax?

A

Individuals = to pay CGT on the value of gains that exceed their annual exemption (£11,300)

Gains above this = subject to CGT at max rate of 20% for non-residential property

Finance Act 2016 introduced an upper rate maximum of 28% = applies to gains realised on residential properties.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is income tax?

A

Profits realised from a trade that deals in / develops land = chargeable to income tax at rates up to 45%

(CGT rate up to 28% therefore seems more appealing)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are VAT liabilities?

A

If landowner = VAT-registered, supply of land and buildings as a freehold sale = generally exempt from VAT; therefore no output VAT would be charged on sale cost.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is stamp duty land tax (SDLT)?

A

If one buys a property or land over a certain price, one must pay SDLT = a tax that is levied on single property purchases or documents

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is SDLT for non-residential properties?

A

For non-residential properties – over £150,000
Up to £150,000 – Zero SDLT
£150,001-£250,000 – 2% SDLT
Above £250,000 – 5% SDLT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is SDLT for residential properties?

A
For residential properties – over £500k (CURRENTLY)
Up to £500,000 – Zero SDLT
£500,001-£925,000 – 5% SDLT
£925,001-£1.5 million - 10% SDLT
Portion above £1.5 million -12% SDLT
How well did you know this?
1
Not at all
2
3
4
5
Perfectly