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Property Taxation Collection

Dáil Éireann Debate, Tuesday - 16 April 2013

Tuesday, 16 April 2013

Questions (346, 347, 348, 349, 350)

Róisín Shortall

Question:

346. Deputy Róisín Shortall asked the Minister for Finance if he will provide details on the respective weighting applied to each of the property characteristic variables listed in table 2 of page 11 of the Revenue Commissioner's Property Valuation - Developing, Assessing and Deploying a Valuation Model for Local Property Tax. [17494/13]

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Róisín Shortall

Question:

347. Deputy Róisín Shortall asked the Minister for Finance the way in which data on local crime rates was used in the statistical model developed by the Revenue Commissioners to produce estimates of property valuations; and the weighting afforded to this dataset. [17495/13]

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Róisín Shortall

Question:

348. Deputy Róisín Shortall asked the Minister for Finance the specific house type data the terraced, semi-detached and so on available to the Revenue Commissioners through the geo-directory for the purposes of preparing a property valuation model; and if information on categories such as end of terrace and corner house and corner house with site is available to and used by the Revenue Commissioners in the statistical model developed by them to produce estimates of property valuations. [17496/13]

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Róisín Shortall

Question:

349. Deputy Róisín Shortall asked the Minister for Finance if he will clarify which small area the property at (details supplied) was included in for the purposes of determining house valuation. [17497/13]

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Róisín Shortall

Question:

350. Deputy Róisín Shortall asked the Minister for Finance his views on whether the information sources available to the public in respect of the valuation of their property for the purposes of the local property tax are adequate; and the action he proposes to take to improve the property valuation guidance provided by the Revenue Commissioners to the public. [17498/13]

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Written answers

I propose to take Questions Nos. 346 to 350, inclusive, together.

The Finance (Local Property Tax) Act 2012 sets out how the tax is to be administered and how a residential property is to be valued for Local Property Tax (LPT) purposes.

LPT is a self-assessed tax and as I have advised the House on many occasions, it is a matter for the property owner in the first instance, to calculate the tax due based on his or her assessment of the market value of the property. For the purposes of LPT, values for properties under €1 million are organised into valuation bands, with a range of €50,000 in each band, so owners will not be required to provide a precise value for their property.

The Revenue Commissioners have prepared valuation guidance which, together with the owner’s own knowledge of a property, will assist him or her in assessing its value. This guidance should be used together with other sources of information including the Property Services Regulatory Authority’s property price register, property sections of newspapers, information from local estate agents and property websites. When using Revenue’s valuation guidance, property owners should consider the specifics of their own property and if they feel that the guidance is not indicating a reasonable valuation, they should make their own assessment.

In the absence of a national residential property valuation system, the valuation guidance developed by Revenue is designed to help property owners in self-assessing the market value of their property by giving them average, indicative values for their area. The guidance is based on sales in the last 3 years and provides a benchmark to help people consider whether their property is more or less valuable than the average in an area. This guidance will be helpful in the majority of cases but there are always properties in an area that differ from the average.

The valuation guidance explicitly states: “This service provides a guide to average market values of properties in a given locality and offers an indicative valuation band for properties depending on type, age and location. It does not provide market values for individual properties.”

Revenue has made the guidance as simple as possible – users need only know their property’s type, age and location. The Revenue valuation guidance website combines two aspects – a simple point and click option to get an average valuation for an area (electoral district) and an interactive map showing relative valuations across electoral districts.

I note the Deputy’s statement last week on the Revenue guidance and I will take this opportunity to explain briefly how property owners should use the guidance. To take, for example, the owner of a semi-detached property, the Revenue guidance may show the average valuation band for this property type in the location is between €350,000 and €400,000. If an owner of a 2 bedroom semi-detached property knows that the majority of semi-detached houses in their area have 3 bedrooms then that owner can reasonably expect the Revenue guidance to reflect the value of a 3-bed. This could offer a basis to adjust the valuation of their property downwards from the guidance average. In another example, in the case that the Deputy noted where four houses sold on a road over the last year are valued on the property price register between €100,000 and €200,000. If all the houses are similar, then a property owner will likely select the most recent sale as the best guide to the value of their property. If the four properties are different, then the owner should select the one that most resembles their house.

Again, it is important reiterate that the Revenue guidance does not claim to value every house. Using the guidance requires a property owner to make an assessment based on their knowledge of their house, the neighbourhood, the house types and any factors they feel are relevant, as well as combining the Revenue guidance with property price register and any other appropriate sources of information available to them.

The Deputy also makes a reference in her statement to the Revenue Estimate. There has been much commentary about this figure, some of which has not been particularly helpful for property owners who are trying to meet their obligations. As I have stated in the House previously, the Revenue Estimate is not based on a valuation of each owner’s individual property nor should it be regarded as an accurate calculation of the amount of LPT that they should pay. This is the amount of LPT that will be pursued by Revenue, if the liable person fails to complete and submit their LPT Return. It can be simply displaced by the property owner submitting their own valuation of their residential property and indicating their payment preference.

I am also advised that underlying their simple valuation guidance system, a detailed economic model has been developed by Revenue. The model used is a hedonic econometric regression model. This approach disaggregates the value of a property into constituent parts to assess the contribution of different characteristics and provides a weighting for each.

Information on property characteristics is taken from a range of sources:

Geo-Directory: a list of all properties in Ireland, their type and location;

Spatially derived data that indicate relative distances of all residential properties from a series of key amenities and services;

Geographically linked data from sources, such as the Central Statistics Office 2011 Census results at small area level and the HP Pobal Deprivation Index.

In relation to the Deputy’s question on crime statistics, it should be noted that none of the information sources used by Revenue include data on criminal activity.

Regarding property types, I am advised by the Revenue Commissioners that Geo-Directory includes detached, semi-detached, bungalow and terraced properties. Revenue has used information on postal delivery points (also contained in Geo-Directory) to extrapolate where above property types are subdivided into flats or apartments. Geo-Directory does not distinguish corner or end terrace properties, Revenue has focused on data available for all properties in the State. As no nationwide database exists with information on corner or end terrace properties, these are not included in Revenue guidance.

Details on the development of the economic model used by Revenue are included in a paper published by Revenue on their website in early March, which you reference in one of your questions. This paper includes all the standard outcome measures used when reporting on regression models of property values. The regression coefficients estimated for each property characteristic (the weightings) are not included. There are hundreds of estimated coefficients and their related statistical attributes across the various regression models produced. The weightings as estimated are dependent on the sample of valuations used in the model. Because of a number of technical issues in the construction of the economic valuation model, it is not feasible to present the individual weightings in a meaningful way.

Regarding the specific case raised by the Deputy, I am advised that Revenue is not providing guidance at the level of small area. Instead Revenue’s guidance uses electoral districts. These are the smallest legally defined administrative areas in the State. The CSO has developed more granular areas, known as small areas. Revenue used some CSO small area data from Census 2011 in estimating our valuation guidance and therefore the guidance takes into account small area variation to a degree. However, Revenue has not provided average valuation bands by small area. The main reason for this relates to data availability. Moving down to small area level in some cases would reduce the number of sales, which is used to generate the average valuation guidance, per small area to very low numbers. It is possible that some small areas would have no sales. From a statistical perspective, the use of limited numbers of valuations to generate averages would risk producing results that are not sufficiently robust or reliable. For the Deputy’s information, the specific property in question is located in small area id number 268060012 according to Geo-Directory records. I am informed that Geo-Directory and Central Statistics Office (CSO) classifications do not provide any additional identification description for small areas beyond the small area id number.

The Revenue guidance follows methods similar to those used by tax administrations in other countries and meets internationally accepted standards for this type of work. In addition, it compares favourably to research in Ireland, including work by researchers in the Economic and Social Research Institute (ESRI). Other valuation guidance and models in Ireland, for example those produced by some property or real estate listings websites, also use similar methods to providing average valuations.

I am advised that the online guidance is being used extensively by the public. Up to 11 April 2013, in excess of 847,000 “hits” were recorded on the site and over 181,000 users either opened the hard copy of the valuation guidance from the Revenue website or saved it to their own computer. I would also like to point out, regarding guidance for those who do not use the internet, that the Revenue Commissioners have prepared paper copies of the indicative valuation band for each property type in every electoral district in the country. These are available from Revenue public offices, the major Citizens’ Information Centre offices and were made available to members of the House at briefing sessions organised for them a few weeks ago.

In the context of a self assessed tax, I am completely satisfied that Revenue’s online valuation guidance is fit for purpose and performs at least equally well, if not better, than other sources of valuation guidance that are available. I am confident that the valuation guidance will be useful for the majority of property owners in assisting them to value their homes.

I am also satisfied that Revenue’s general guidance on the various sources available to assist in property valuation enables property owners to make an honest and reasonable assessment of the appropriate valuation band for their residential property. The level of public debate on property valuation suggests that most people are engaging with the Local Property Tax, have a good general sense of the value of their property, are carrying out research to enable them to do their self-assessed return, and I welcome that.

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