Friday 9 December 2016

Calculating the level of house insurance

Philip Farrell

Published 28/02/2016 | 02:30

'A note of caution - don't under-insure your home for the sake of saving on your annual premium. If you need to make a claim, the pay out will be based on the actual cover in place not the recommended reinstatement figure, so you may find yourself with a shortfall'
'A note of caution - don't under-insure your home for the sake of saving on your annual premium. If you need to make a claim, the pay out will be based on the actual cover in place not the recommended reinstatement figure, so you may find yourself with a shortfall'

House and contents insurance is something we all need to take out at some point. For renters it's generally simply a matter of taking out a contents policy, as the landlord normally shoulders the responsibility for insuring the building. But, whether it's for your principal home or for a residential investment property, great confusion reigns about how much cover is necessary.

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Many people mistake the market value of their property for the reinstatement figure, which is the figure used for insurance purposes. Yet there is no relationship whatsoever between the figures.

The market value is the price the property is expected to achieve when placed on the open market and will be determined by market forces. The reinstatement figure is the cost that would be incurred to rebuild a home subject to current building regulations.

The Society of Chartered Surveyors Ireland (SCSI) produces a guide of recommended rates (scsi.ie). These figures vary depending on the type of building insured and its locaton. Using a traditional three-bed semi as an example, the location with the lowest replacement costs is the northwest of the country at €1,242 per sqm. Outside of Dublin, most cities and large urban areas, a recommended figure is about €1,455 per sqm. Needless to say, the most expensive region is Dublin at €1,869 per sqm. All these rates cover buildings only.

A note of caution - don't under-insure your home for the sake of saving on your annual premium. If you need to make a claim, the pay out will be based on the actual cover in place not the recommended reinstatement figure, so you may find yourself with a shortfall.

Election overdose?

Two days after the election and are we any the wiser? With the discussions that are now taking place between the various parties and the large number of independents who could have a role to play, you can be sure that housing will have a key role in negotiations.

With so many different housing-related bodies nationally, we need some joined-up thinking in relation to the overall national housing strategy. The appointment of a Minister for Housing should be a priority for the next government.

Over the last five years both Government and local authorities have relied on the private market to satisfy our social housing needs. As a result we are now in the midst of a housing crisis. We have no availability in the areas of highest demand. In their pre-election manifestos all the major parties highlighted their housing strategies, which comprised of the provision of anything up to 150,000 new social housing units over the next five years. Prior to the last election in 2011, the primary issues in housing were more to do with negative equity and mortgage arrears. Whilst these are still significant challenges, they have been overtaken by the lack of supply of both social and private housing.

It is ironic with the current housing waiting list standing at 135,000 that it is now intended that the Government engage the assistance of Nama in addressing the housing shortage. This is despite the fact that Nama's role over the last three years has included the disposal of large tranches of distressed assets, including residential property, to international equity funds.

Let's revisit SSIAs for FTBs

Another topical pre-election theme was the proposed introduction of incentives for first-time buyers, not dissimilar to the ssia scheme introduced back in 2001 for savers in the State. For those first-time buyers who are too young to remember, the ssia scheme involved the government adding one euro in every four on savings made over a particular period. It proved very successful at the time.

If a similar incentive were to be introduced now for the ftb, it would allow people to buy sooner rather than renting longer, so reducing the pressure on the spiralling rental market where supply is 70pc down in parts of the country and demand at an all-time high.

The new governor of the Central Bank, Philip Lane, has also stated recently that "the Central Bank is open to the tightening or loosening of the calibration of these rules".

When asked about a possible time-frame for reviewing the rules, he went on to say: "I expect the first review of the mortgage rules to be published by November of this year." Irrespective of this, assistance for first-time buyers is needed now.

Big demand for land bank

Possibly the biggest residential land bank to be sold in Ireland in 2016 came to market last week. The total size runs to 128 acres over seven sites in Leixlip, Naas, Newbridge and Swords. Primarily zoned residential with a small amount of industrial, the sites are being sold by David Daly's Albany Group with the consent of Nama. When developed, the sites will provide up to 1,500 homes of all types. A couple of the sites are ready to go, others will require purchaser to take a medium-term view.

Due to the acute shortage of new homes available, each site is being sold separately. Savills are the selling agents for the Dublin sites and are joint agents with REA Coonans for the Kildare sites. The vast majority of the lands will be used for starter homes. The largest site is in Newbridge and extends to 50.8 acres and was bought in 2006 for €58m. It is now being guided at €6, a 90pc reduction.

A more immediate option is 12 acres in Swords with planning for 177 units, guiding €5.5m. There is also a substantial 38.5 acre site in Leixlip in a prime residential location with expired permission for 455 units for €23m.

Sunday Independent

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