The Latest Valuation is the estimated valuation of the SPV that holds the property.
The Latest Valuation of the shares is updated when the property is initially made available on the Exchange. Valuations reflect:
- The change in Vacant Possession and Investment property value (i.e. the Latest Property Value), as determined by an independent RICS accredited surveyor, if any
- The amortisation of purchase costs
- The mortgage
- The net cash position
- A change in the deferred tax provision, if any
It is worth noting that if the property is geared, unless proceeds from unit sales were used to reduce the mortgage, the mortgage balance will remain unchanged each month - this is because the debt is interest only.
Purpose-Built Student Accommodation (PBSA) properties on our platform are re-valued on an annual basis by independent RICS accredited surveyors and will be updated on or about the 30th April.
Every April, we commission independent valuations for all properties in our portfolio from Allsop, a market-leading, RICS-approved surveyor, usually published on 30 April. For residential properties, Allsop reports two valuation methods, both of which are disclosed in their reports on our site for each property:
- Vacant Possession Value (VPV): assumes each unit within a residential block is sold individually, with vacant possession (i.e. no tenant in place).
- Investment Value (IV): assumes a block of residential units is sold in a single transaction, to a single investor; these transactions attract a discount to VPV, because owner-occupiers are excluded and investors seek discounts for buying in bulk.
Finally, every five years we arrange a Chartered Surveyor’s physical inspection and valuation process to provide a further update to valuation. This valuation is the basis for the five yearly exit process. You can find out more further information on the 5 yearly anniversary process here.
Amortisation of Purchase Costs
Purchase costs are amortised (depreciated) over the period to the first five year anniversary of the property’s listing on our site. This means we spread the cost over five years, gradually reducing the total purchase costs over that period in equal monthly amounts. For example, if total purchase costs were £6,000, this amount would reduce by £100 each month until the 'five year anniversary' at which point the outstanding balance would be zero.
Purchase costs include Stamp Duty Land Tax, third party professional fees (including any brokerage fees), pre-letting expenses (including furnishing), and other third party costs relating to the purchase of a property and arranging the mortgage (if applicable). These purchase costs are unavoidable and are incurred by all individuals and companies that acquire buy-to-let properties.
Should the property value increase, corporation tax may be payable on the gain on disposal. This is because all properties listed on London House Exchange are acquired through a Special Purpose Vehicle (SPV), which is a UK limited company. This future corporation tax liability is recognised in the valuation of the SPV (the Latest Valuation) and is called deferred tax. When we revalue the properties, as described above, we adjust the Deferred Tax provision accordingly. The Latest Property Value has to increase to an amount greater than the purchase price plus certain incidental purchase costs before any deferred tax is recognised.
Deferred Tax only becomes payable if and when the property is sold, and is considered a potential “liability” until that point. For example, if the property valuation increased by £10,000 over and above the purchase price and certain purchase costs, then £1,900 (£10,000 x 19%) would be recognised as a deferred tax liability.