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A decision made (30/04/2007) regarding: Le Squez Phase 1b - sale of homes - prices.

Subject:	Le Squez Phase 1b – sale of homes - prices
Decision Reference:	MD-H-2007-0029	Exempt clause(s):
Type of Report: (oral or written)	Written	Person Giving Report (if oral):
Telephone or e-mail Meeting?		Report File ref:		WR - Le Squez Phase 1b - homes for sale - prices 13-4-07cm
Written Report – Title	WR - Le Squez Phase 1b - homes for sale - prices 13-4-07cm	Written report - author		Carl B Mavity – Director of Estate Services
Decision(s): 1. The Minister approved the increase in sale prices of homes at Le Squez Phase 1b to the newly assessed first time buyer values less a maximum enabling and repayable discount of 25% 2. The Minister agreed to seek the approval of the Treasury and Resources Minister to that arrangement.
Reason(s) for decision To ensure that the sale prices reflect the current value of the assets
Resource implications Financial: NIL Manpower: NIL Property: NIL ICT: NIL Law Drafting: NIL
Action required: Copy of Decision and Report to be forwarded to Treasury & Resources Minister for approval
Signature: (Minister/ Assistant Minister)			Date of Decision: 30 April 2007

Le Squez Phase 1b – sale of homes - prices

Date of Report: 27th April 2007

REPORT FOR HOUSING MINISTER

HOMES FOR SALE LE SQUEZ, PHASE 1B

Background

In November 2005, the sale of the first 18 of 208 planned completed homes at Le Squez/Le Marais were sold by the Department to existing States Tenants at a discount below first time buyer market levels. That discount of 10% is to be recouped on the next conveyance of the individual properties, P19/2004 refers.

Sale prices ranged from £211,000 for a 3 bedroom home to £238,500 for a 4 bedroom home.

Phase 1b of Le Squez which is due for completion in August 2007 is under construction at present and is made up of the following accommodation:-

3 No. New Build 4 Bed Houses

13 No. New Build 3 Bed Houses

5 No. New Build 2 Bed Houses

3 No. New build disabled 3 bed Houses

1 No. Refurbished 5 bed House

2 No. Refurbished 4 bed Houses

30 No. Refurbished 3 bed Houses

3 No. New build 2 Bed Flats

15 No. New build 1 Bed Flats

Health & Social Services Day Care Centre

A site plan depicting the scheme is attached at Annex A.

All of the flats are to be retained for rental purposes.

The 2 No. refurbished 4 bedroom houses, 26 No. 3 bedroom houses and all of the 2 bedroom houses have been earmarked for sale to existing tenants and deposits of £1,000 are held against 26 of them.

In most cases the deposits were accepted in 2004 & 2005 with prices for the completed homes reflective of 2004 first time buyer market levels.

The Department’s new Management Team have been most conscious that property prices have been increasing steadily since 2004 and were determined to ensure that any planned sale of what are Public assets should be at realistic market levels at the time. A recent valuation exercise carried out by 3 experienced local estate agents has suggested what the sale prices should now be. A schedule of the original sale prices, prices suggested by each agent, averages thereof and variances is attached at Annex B.

It can be seen that taking the averages of the recent valuations all of the agreed proposed sales are at prices at least £65,000 below present first time buyer market levels, not surprising given the fact that 3 years have passed since prices were fixed.

Sales of the homes at the prices agreed thus far would result in excessive profiteering by some buyers who could sell immediately after purchasing and realistically expect to make up to £85,000 profit. That cannot be what was intended of a scheme which was designed to be an enabling discount to assist tenants in gaining 100% mortgages in order to be able to purchase. Indeed avoiding such profiteering was specifically referred to in the report which accompanied P19/2004.

Proposal

It is proposed that the sale prices for the homes at Le Squez 1b should be increased to the new first time buyer market levels using as a guide the average of the prices suggested by the 3 Agents at Appendix B.

Legal advice received from HM Solicitor General suggests that the deposit agreements entered into do not hold the Department to sell at a particular price. However, it is easily appreciated that some potential buyers may be at the ceiling of their borrowing potential and an increase in asking price could preclude them from purchasing, an eventuality which should ideally be avoided. One option would be to increase the asking price and the enabling discount correspondingly up to a maximum of 25%, so as to maintain the discounted purchase price or limit the amount of any necessary price increase.

For example; House number 10 had a previous first time buyer value of £225,000. The benefit of the 10% discount provided for a sale price of £202,500.

If the value of that house is now £280,000 as suggested, then a 10% discount would provide for a sale price of £252,000, some £49,500 more than would have been indicated to the proposed purchaser in 2004. Widening the level of the deposit to 25% as is proposed in the Property Plan would allow for that home to be sold at £210,000. This would in effect be increasing the amount that purchaser has to pay to buy the home by only £7,500.

Recommendation

That the Minister:-

1. Approves the increase in sale prices of homes at Le Squez Phase 1b to the newly assessed first time buyer values less a maximum enabling and repayable discount of 25%

2. Seek the approval of the Treasury and Resources Minister to that arrangement.

C B MAVITY

Director of Estate Services

Le Squez Phase 1b Valuations

House No.	New or Refurb	Type	AGENT 1	AGENT 2	AGENT 3	Average Sale Price at 100%	Average Sale Price at 75%	Residual Value @ 25%	Agreed Sale Price	Difference

1	Disabled Unit NEW	3	£ 310,000.00	£ 325,000.00	£ 315,000.00	£ 316,666.67	£ 237,500.00	£ 79,166.67	NOT FOR SALE	£ -
2	Disabled Unit NEW	3	£ 300,000.00	£ 320,000.00	£ 315,000.00	£ 311,666.67	£ 233,750.00	£ 77,916.67	NOT FOR SALE	£ -
3	NEW	4	£ 310,000.00	£ 310,000.00	£ 315,000.00	£ 311,666.67	£ 233,750.00	£ 77,916.67	No agreement	£ 311,666.67
4	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
5	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
6	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
7	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
8	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
9	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
10	REFURB	3	£ 275,000.00	£ 280,000.00	£ 285,000.00	£ 280,000.00	£ 210,000.00	£ 70,000.00	£ 202,500.00	£ 77,500.00
13	NEW	2	£ 270,000.00	£ 270,000.00	£ 265,000.00	£ 268,333.33	£ 201,250.00	£ 67,083.33	£ 200,000.00	£ 68,333.33
14	NEW	2	£ 270,000.00	£ 270,000.00	£ 265,000.00	£ 268,333.33	£ 201,250.00	£ 67,083.33	£ 200,000.00	£ 68,333.33
15	NEW	3	£ 280,000.00	£ 280,000.00	£ 295,000.00	£ 285,000.00	£ 213,750.00	£ 71,250.00	£ 216,000.00	£ 69,000.00
16	REFURB	3	£ 270,000.00	£ 280,000.00	£ 285,000.00	£ 278,333.33	£ 208,750.00	£ 69,583.33	£ 200,250.00	£ 78,083.33
17	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
18	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
19	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
20	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 200,250.00	£ 76,416.67
21	REFURB	3	£ 270,000.00	£ 280,000.00	£ 285,000.00	£ 278,333.33	£ 208,750.00	£ 69,583.33	£ 202,500.00	£ 75,833.33
22	NEW	2	£ 270,000.00	£ 270,000.00	£ 265,000.00	£ 268,333.33	£ 201,250.00	£ 67,083.33	£ 200,000.00	£ 68,333.33
23	NEW	2	£ 270,000.00	£ 270,000.00	£ 265,000.00	£ 268,333.33	£ 201,250.00	£ 67,083.33	£ 200,000.00	£ 68,333.33
24	NEW	2	£ 275,000.00	£ 275,000.00	£ 265,000.00	£ 271,666.67	£ 203,750.00	£ 67,916.67	£ 205,000.00	£ 66,666.67
25	Disabled Unit NEW	3	£ 310,000.00	£ 325,000.00	£ 315,000.00	£ 316,666.67	£ 237,500.00	£ 79,166.67	NOT FOR SALE	£ -
26	NEW	3	£ 290,000.00	£ 290,000.00	£ 295,000.00	£ 291,666.67	£ 218,750.00	£ 72,916.67	No agreement	£ 291,666.67
27	NEW	3	£ 290,000.00	£ 290,000.00	£ 295,000.00	£ 291,666.67	£ 218,750.00	£ 72,916.67	No agreement	£ 291,666.67
28	NEW	3	£ 290,000.00	£ 290,000.00	£ 295,000.00	£ 291,666.67	£ 218,750.00	£ 72,916.67	No agreement	£ 291,666.67
29	NEW	3	£ 290,000.00	£ 290,000.00	£ 295,000.00	£ 291,666.67	£ 218,750.00	£ 72,916.67	No agreement	£ 291,666.67
30	NEW	3	£ 290,000.00	£ 290,000.00	£ 295,000.00	£ 291,666.67	£ 218,750.00	£ 72,916.67	No agreement	£ 291,666.67
31	NEW	4	£ 300,000.00	£ 310,000.00	£ 315,000.00	£ 308,333.33	£ 231,250.00	£ 77,083.33	No agreement	£ 308,333.33
32	REFURB	3	£ 270,000.00	£ 280,000.00	£ 285,000.00	£ 278,333.33	£ 208,750.00	£ 69,583.33	£ 198,000.00	£ 80,333.33
33	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 198,000.00	£ 78,666.67
34	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 198,000.00	£ 78,666.67
35	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 198,000.00	£ 78,666.67
36	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 198,000.00	£ 78,666.67
37	REFURB	3	£ 270,000.00	£ 275,000.00	£ 285,000.00	£ 276,666.67	£ 207,500.00	£ 69,166.67	£ 198,000.00	£ 78,666.67
38	REFURB	3	£ 275,000.00	£ 280,000.00	£ 285,000.00	£ 280,000.00	£ 210,000.00	£ 70,000.00	£ 215,000.00	£ 65,000.00
39	NEW	3	£ 280,000.00	£ 280,000.00	£ 285,000.00	£ 281,666.67	£ 211,250.00	£ 70,416.67	£ 216,000.00	£ 65,666.67
40	NEW	3	£ 280,000.00	£ 275,000.00	£ 285,000.00	£ 280,000.00	£ 210,000.00	£ 70,000.00	£ 211,500.00	£ 68,500.00
41	NEW	3	£ 280,000.00	£ 275,000.00	£ 285,000.00	£ 280,000.00	£ 210,000.00	£ 70,000.00	£ 211,500.00	£ 68,500.00
42	NEW	3	£ 280,000.00	£ 275,000.00	£ 285,000.00	£ 280,000.00	£ 210,000.00	£ 70,000.00	£ 211,500.00	£ 68,500.00
43	NEW	3	£ 280,000.00	£ 280,000.00	£ 285,000.00	£ 281,666.67	£ 211,250.00	£ 70,416.67	£ 211,500.00	£ 70,166.67
44	NEW	4	£ 300,000.00	£ 310,000.00	£ 315,000.00	£ 308,333.33	£ 231,250.00	£ 77,083.33	No agreement	£ 308,333.33
45	NEW	3	£ 280,000.00	£ 290,000.00	£ 300,000.00	£ 290,000.00	£ 217,500.00	£ 72,500.00	No agreement	£ 290,000.00
46	NEW	3	£ 280,000.00	£ 295,000.00	£ 300,000.00	£ 291,666.67	£ 218,750.00	£ 72,916.67	No agreement	£ 291,666.67
47	REFURB	4	£ 320,000.00	£ 295,000.00	£ 300,000.00	£ 305,000.00	£ 228,750.00	£ 76,250.00	£ 220,000.00	£ 85,000.00
48	REFURB	4	£ 315,000.00	£ 290,000.00	£ 300,000.00	£ 301,666.67	£ 226,250.00	£ 75,416.67	£ 220,000.00	£ 81,666.67
49	REFURB	4	£ 330,000.00	£ 295,000.00	£ 300,000.00	£ 308,333.33	£ 231,250.00	£ 77,083.33	No agreement	£ 308,333.33

TOTALS			£13,250,000.00	£13,360,000.00	£13,610,000.00	£13,406,666.67	£10,055,000.00	£3,351,666.67	£ 6,953,750.00	£5,727,916.67