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  • Writer's pictureThe Beagle

are we facing being under-insured as house prices spike

As the median price for houses in the Eurobodalla continues to climb we need to consider the impact to those of us who are not selling. It is inevitable that the sales in our neighbourhoods will see a spike in our Unimproved Land Value. Land value is the value of your land only – your home, or any additional structures or improvements you may have made, are not considered when the property is valued. The Valuer General determines land values at 1 July each year in line with the Valuation of Land Act 1916 (the Act).

"Under section 6A(1) of the Act, we must assume the land is vacant and value it on its highest and best permitted use. This is based on current zoning and planning restrictions determined by councils. But if the land’s development exceeds those restrictions, we must apply section 6A(2) and instead value it on its higher existing use." So we can all expect a new valuation that is calculated on July 1st 2022. Your land is based on the most recent sales history of your neighbourhood. In my neighbourhood a vacant 450m2 block sold for $413,000

The Valuer General says "property sales are the most important factor valuers consider and can help you see if the market evidence supports your land value". So around us we are seeing duplexes popping up. Added to this are subdivisions of 450m2. If you own land that is able to have a duplex and a duplex was recently sold in your neighbourhood the value of that sale will translate into the potential your land has to be subdivided and a projection of its value made to determine your new Unimproved Land Value. The bottom line is to expect your Valuation to increase. As a consequence your rates will also increase. Council just adopted a 1.7% increase in rates that will be based on your Unimproved Land Value (ULV). As the ULV increases so does Council's revenue. So be prepared. The next concern is that the cost of building is also spiking. Materials have gone up dramatically along with fuel and Council's fees and charges for development applications and contributions. All of that factors in to the insurance value of your home. If it was to be destroyed by fire, flood or otherwise the cost to rebuild is considerably more than it was just two years ago. The Cordell Construction Cost Index (CCCI) is a quarterly industry benchmark that tracks and monitors the movement of building work costs for stand-alone houses.

It indicates the rate of change in prices with segments of the Australian construction industry and includes expert commentary on key market factors such as cost of supplies and labour. National and state-based price changes are included, providing a broad understanding of how building costs are trending on a quarterly basis. Cordels are reporting an annual growth of 7% though locally it is considered to be higher. The Cordel values are the ones that insurance companies generally use in their on-line house insurance valuation tools. You might like to revisit the insurance you have on your home and satisfy yourself that the value you have set actually reflects the current (and climbing) costs of rebuilding. The bushfires of 2020 revealed that there were many of the 1000 homes destroyed that were under-insured. That same revelation is now being realised to homes that are flood affected. Adding to the reality of the homes already impacted is the fact that Council's are now providing insurers with "layers" that show the extent of potential flooding, potential sea surge inundation and potential bushfire exposure that are generally defined in an office without field checking. Once a property is labelled it remains so unless challenged. The consequences are immediate as insurance premiums quadruple or insurance is withdrawn. The bottom line is that we should be cautious of the new Unimproved Land Values we receive and compare them to the previous. Then compare your value with neighbours. I did exactly that and challenged the Valuer General that I was office-valued nearly $200,000 above my neighbours. The challenged forced an onsite revaluation and the ULV was reduced to reflect my neighbours values. I also have just built a new home. Even within one year the cost of the build would now be considerably higher. As the costs around us spike we also need to be cautious of those that creep quietly.

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NOTE: Comments were TRIALED - in the end it failed as humans will be humans and it turned into a pile of merde; only contributed to by just a handful who did little to add to the conversation of the issue at hand. Anyone who would like to contribute an opinion are encouraged to send in a Letter to the Editor where it might be considered for publication

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