Insured Price < Market price?

connundrum

Hi,

I've taken on a new line of work and have recently become privvy to a few insurance records for buildings around Dublin. So from what I can see, the buildings are insured for rougly 50% of what might be considered to be the market price ie. One block of apartments are insured for C€210,000 per unit, whereas I know that they are on the market and selling for C€500,000 per unit.

It appears to be the same story across the board. Now I am not a home owner, and I am quite new to the job so I mightn't have the full story here, but is this the norm? I always thought that the current prices were rediculously false, but not to this gross level.

If one's home were to be destroyed in the above situation, they'd obviously think that they'd be covered to the market price level, as they were always paying their insurance premiums on time etc, but they'd obviously be in for quite a shock when the claim cheque comes through.

To clarify, I'm talking only about apartment units for the moment. Obviously if you were to insure your own home (2/3 bed semi d etc), you'd be fully aware of what your insurance would cover.

Again I mightn't have the full story here so please feel free to correct me, its just that I was shocked by the figures. Please enlighten me

Saruman

This is normal, being a home owner i found this out. You do not insure for market value. You insure for rebuilding value. It will not cost the market value to rebuild a house as market value is not real. Its an illusion if you will. For instance a lot of the market value is in the location of the property and not the property itself.
Though i think its usually more than 50% though.

Apartments would be no different. In fact Apartments are probably worth less because only 1 building needs to be rebuilt and sectioned off if an apartment block caught fire or something and was destroyed.

Make sure you have good contents insurance to go with building insurance though.

connundrum

Aaahh, it all makes sense now. I just got wrapped up in the market values.

But I still can't believe that a 110 unit building in Temple Bar can be rebuilt for €22m, but I guess the insurers know more than lil ole me

ronbyrne2005

connundrum wrote:

Aaahh, it all makes sense now. I just got wrapped up in the market values.

But I still can't believe that a 110 unit building in Temple Bar can be rebuilt for €22m, but I guess the insurers know more than lil ole me

Apartments of around 50sq metres only cost around 100k euro or less each to build excluding land.
From Irish Times 2006. This refers to building houses, apartments are cheaper to build (economies of scale, materials etc)


Building costs go boom boom: Anyone planning to build a once-off house should get a copy of Bruce Shaw's latest handbook which delves into the costs of building residential and commercial space around the State.

Shaw estimates the cost of building a detached home in Dublin runs at €1,861 per sq m - €450 per sq m more than in Cork, Galway or Limerick. The most expensive city after Dublin is Limerick where the cost is €1,410 per sq m. The fees allow for demolition costs, Vat of 13.5 per cent of building costs and 21 per cent on professional fees. Come to think of it, not too many people are building once-off houses these days as infill sites are being snapped up by small builders who have no difficulty in getting permission for blocks of apartments. However, many harassed householders who are carrying out refurbishment to old houses might question Bruce Shaw's figures because the reality is that, with builders in huge demand, those who are available seem to be making a killing on domestic jobs. Watch out too for the cost of building supplies in the DIY stores which we hear are creeping up in advance of the payout from the SSIA schemes, as builders apparently stockpile for the mini boom that's coming.

Its the artificially high price of land keeping prices high. There is NO shortage of land in Ireland, we are among least densly populated countries in Europe.

Victor

http://www.scs.ie/publication/pdf/homeownersguide2006.pdf

ronbyrne2005 wrote:

Its the artificially high price of land keeping prices high. There is NO shortage of land in Ireland, we are among least densly populated countries in Europe.

Location, location, location.

Occassionally you get places where the reinstatement value exceeds market value, e.g. in rough areas of Dublin in the 1980s.

ronbyrne2005

Victor wrote:

http://www.scs.ie/publication/pdf/homeownersguide2006.pdf

Location, location, location.

Occassionally you get places where the reinstatement value exceeds market value, e.g. in rough areas of Dublin in the 1980s.

Yes location will make some land dearer than others but all land in Ireland is overvalued. If the government rezoned all the agricultural land near Dublin and built good transport/infrastructure and forced those owning land and not developing it to develop it or be taxed to high heaven then land would be much cheaper. The planning system does'nt work/has'nt worked. See new report on urban sprawl/ underutilisation of land out today.

Jo King

Ther are some situations in which it is wise to be insured for market value. If your site is destroyed by chemical contamination for example you might have to claim on a market value basis. It was quite common in the 80s for rebuilding cost to be in excess of market value. Large period houses in Rathmines and Ranelagh were selling for mless than 50K.

iguana

ronbyrne2005 wrote:

If the government rezoned all the agricultural land

You do realise that agricultural land actually serves it's own purpose, right? A purpose which is actually even more nessecary to being alive than having a house.

The production of FOOD.

ronbyrne2005

iguana wrote:

You do realise that agricultural land actually serves it's own purpose, right? A purpose which is actually even more nessecary to being alive than having a house.

The production of FOOD.

You don't need to produce food near a major city. Theres plenty of land away from cities for that. It's mad that we still see the odd farm inside the M50 . You'd never see that in any major European/American city. The utility value of the land near cities for society is much greater if built upon, or maybe you enjoy seing people stuck in traffic on a road into dublin looking at the horses grazing on land that should be developed to facilitate efficient growth of the city.

iguana

ronbyrne2005 wrote:

You don't need to produce food near a major city.

This is 2007, ever heard of food miles? The survival of one of the things that we need even more than food, the continued survival of a planet capable of supporting human life, is dependant on measures such as populations reverting to relying on locally sourced food.

Again something a little bit more important than affordable houses.

ronbyrne2005

iguana wrote:

This is 2007, ever heard of food miles? The survival of one of the things that we need even more than food, the continued survival of a planet capable of supporting human life, is dependant on measures such as populations reverting to relying on locally sourced food.

Again something a little bit more important than affordable houses.

What an ignorant reply. I'd rather food driven in from countryside than hundreds of thousands of individuals in cars pumping out CO2 on their long commutes every day. The amount of CO2 etc emitted by transporting food into a city is minute compared to the emmisions from having tens or hundreds of thousands of people commuting in cars into our cities every day because our cities are inefficiently planned. Any one with an iota of knowledge about sustainable development and environmental issues knows urban sprawl as you seem to be defending is hugely damaging to the environment and society. Higher density cities (with sufficient green spaces etc ) are the most green solutions for modern societies.

iguana

ronbyrne2005 wrote:

Higher density cities (with sufficient green spaces etc ) are the most green solutions for modern societies.

What exactly is your source for this claim? Decentralisation and local production, governance and creating a society where people live and work in the same area would be the least planet damaging way for humans to live.

What you are advocating is urban sprawl, just about the worst possible thing that could be done. The first thing that needs to be done is to have a decent 24 hour public transport system in place for the housing areas which already exist. You can't just plunder farmland and develop housing saying that we could just stick in a good public transport system for them despite the fact that that hasn't been possible for the areas that already exist. Lack of houses isn't the main problem in the first place. There are thousands of houses standing empty in Dublin. And there are plenty of houses, they are just in areas that are ridiculously unreachable due to lack of transport facilities.

I live 12k's from my work in London, but with the tube I can make it door to door in 35 minutes. I can leave a Soho club at 4am and be in bed by 4.45am by hopping on the bus, which I don't even have to pay for because my travelcard covers it. There is no way on earth I'd choose to live 12k's from the centre of Dublin, despite the fact that I could buy a great house there and have a tiny mortgage with the profit from my London home.

The houses already exist. Put in a transport system first, then if more houses are needed, which they probably won't be, you could look at re-zoning land. Not the other way around.

ronbyrne2005

iguana wrote:

What exactly is your source for this claim? Decentralisation and local production, governance and creating a society where people live and work in the same area would be the least planet damaging way for humans to live.

What you are advocating is urban sprawl, just about the worst possible thing that could be done. The first thing that needs to be done is to have a decent 24 hour public transport system in place for the housing areas which already exist. You can't just plunder farmland and develop housing saying that we could just stick in a good public transport system for them despite the fact that that hasn't been possible for the areas that already exist. Lack of houses isn't the main problem in the first place. There are thousands of houses standing empty in Dublin. And there are plenty of houses, they are just in areas that are ridiculously unreachable due to lack of transport facilities.

I live 12k's from my work in London, but with the tube I can make it door to door in 35 minutes. I can leave a Soho club at 4am and be in bed by 4.45am by hopping on the bus, which I don't even have to pay for because my travelcard covers it. There is no way on earth I'd choose to live 12k's from the centre of Dublin, despite the fact that I could buy a great house there and have a tiny mortgage with the profit from my London home.

The houses already exist. Put in a transport system first, then if more houses are needed, which they probably won't be, you could look at re-zoning land. Not the other way around.

We have to accept that cities will continue growing so higher densities are need to prevent Dublin spreading too far out. Ideally "Decentralisation and local production, governance and creating a society where people live and work in the same area" would be best for environment but cities exist and will continue growing untill your ideal scenario arises(if it ever arises)
Tranport and other infrastructure needs higher densities to be efficient. Dublin is expanding and people are commuting from likes of meath kildare even carlow because there is a shortage of housing in Dublin(if there was no shortage then why have prizes risen so much over last decade and why have people had to move to commuter counties?). Yes many areas in Dublin are currently underserved by public transport but we need higher densites as well as a better infrastructure. If you read the report released yesterday saying Greater Dublin is on course to become same size as LA but with less than a quarter of its population you realise how low density this city is. Frank McDonald who is the environmental editor of The Irish Times has written extensively on the issue and he advocates Dublin building higher densities closer to city rather than one off housing and estates in commuter towns and having farmland within the M50 or close to Dublin is zero density and lost utility to society.

iguana

ronbyrne2005 wrote:

Yes many areas in Dublin are currently underserved by public transport but we need higher densites as well as a better infrastructure.

Not one area of Dublin has a functioning 24 hour public transport system. Until it does then increasing the population density isn't the answer. Neither is urban sprawl, but finding effecient ways of getting people around the city has to be the priority.