Budget 2007 and Property

astrofool

Anyone expecting any changes? Mortgage interest relief was meant to be increased, but given the state of the finances, may be doubtful now, as would a top rate of tax change.

Stamp duty to be effected at all?

Firetrap

I could be wrong of course but I got the impression from the interview on the news with Brian Cowen that he's going to do something about Stamp Duty. George Lee kept asking him and he wouldn't give a straight answer.

I'm sure the hacks in the Sindo who've been bawling for him to get rid of stamp duty all year will have collective orgasms if he does. And that won't be a pleasant spectacle

How Strange

I can't see him doing anything too dramatic. Brian Cowen is cut from the cloth of Charlie McCreevey - he is prudent and he knows that any drastic changes in the stamp duty will not help the failing property market.
It would be sheer pandering to the construction industry and while Bertie might want him to do it, Cowen seems to be his own man.

He had to back down on stamp duty last year after swearing he wouldn't so I can understand why he know gives ambiguous answers rather than categorical denials of change.

ionapaul

I think he'll change stamp duty - it won't have any meaningful impact on the falling property market but should sell a few more houses in december and january for the almost out of work EAs and so they'll be happy

SkepticOne

My prediction: Lowering of the 9% top rate to 6%. Small enlargement of the exempt band.

ixoy

If there is an increase in mortgage relief, has anyone worked out how very little people it will affect? I seem to recall that a mortgage would have to be high enough at current rates to claim full TRS, so surely an increase wouldn't help any FTBs out.

Ice_Box

New Stamp Duty Regime

Purchases of residences with a value of less than €1 million will be charged to Stamp Duty on the basis that no tax will be payable on the first €125,000 of the consideration, and the balance will be charged at 7 per cent. Only those houses valued in excess of €1 million will pay at a higher rate of 9 per cent on the portion of the price which is in excess of that figure. There will be no losers and no anomalies created by this banding system. It will be extremely simple, and considerably less expensive for both buyers and sellers. More importantly, this regime will also provide for a highly progressive stamp duty system whereby those buying the more expensive houses will always pay a higher effective rate than those buying your average house. This is equity at work.

Because the percentage rates concerned will be paid only on the balance over the relevant threshold, rather than on the whole amount as under the current system, the effective rate paid on most homes will be well below the headline rate. For example, a couple buying a new home for the national average house price of almost €370,000 will pay just over €5,000 less than at present. The effective tax rate falls at all levels - the duty paid on a €350,000 home will fall from 6 per cent under the current Stamp Duty regime to about 4½ per cent under the new system and a €500,000 house will reduce from 7½ per cent to around 5¼ per cent. Indeed, no transaction under €1 million will be charged much more than about 6 per cent duty. This measure will take immediate effect and it will also cover instruments that are due to be presented to the Revenue Commissioners no later than 5 December.

The exemptions that apply in the current system - for example, in relation to first time buyers and buyers of new homes - will be retained. In addition, the current five-year rule, which requires a full claw-back of the stamp duty exemption where the owner-occupier moves out and lets the property, will be reduced to 2 years. This will allow for the retention of an important control in the system, but also better reflect the increased career and residential mobility of our population, and will give potential young house buyers greater flexibility and certainty in their choices.

These progressive reforms will lead to a simplification of the system which will increase the efficiency of the housing market, boost confidence and support employment and overall economic activity. They are the right reforms, introduced for the right reasons at the right time.

The gross cost of these measures in 2008 is €190 million.

djeclips

Great news all round:)

Ice_Box

linky

http://www.rte.ie/news/features/budget2008/speech/chapter10.html

kevin123123

Great post scepticone.From my calculations a secondhand buyer would have paid e37500 stamp duty on a 500k house, but from today that is down to e28125(hopefully my sums are right).this shoud now hopefully revive the slow housing market and put the power in the buyers hands and not the builders and developers. This is good news.Regarding the rest of the budget I beleive it is much better than anticipated.

gurramok

Nothing in this budget will help FTB's who hold the whole 'ladder' up afford expensive houses, don't hold your breadth for a revival.

kevin123123

gurramok wrote: »

Nothing in this budget will help FTB's who hold the whole 'ladder' up afford expensive houses, don't hold your breadth for a revival.

Surely the mortgage releif increase will by increasing the ceiling on mortgage interest relief for first time buyers by €2,000 for a single person and €4,000 for a married couple or widowed person to €10,000 and €20,000 respectively. This will increase the maximum monthly relief available by about €33 and €66 respectively, bringing it to €166 per month for a single person and €333 per month for a married couple or widowed person. These moves are appropriate in ensuring additional support for a hard pressed segment of the housing market and should provide the necessary direction and certainty.

gurramok

kevin123123 wrote: »

Surely the mortgage releif increase will by increasing the ceiling on mortgage interest relief for first time buyers by €2,000 for a single person and €4,000 for a married couple or widowed person to €10,000 and €20,000 respectively. This will increase the maximum monthly relief available by about €33 and €66 respectively, bringing it to €166 per month for a single person and €333 per month for a married couple or widowed person. These moves are appropriate in ensuring additional support for a hard pressed segment of the housing market and should provide the necessary direction and certainty.

Err, no its not.

Mortgage relief is based on the amount of interest one pays on their mortgage every year.
They don't get the maximum 166/333 per month automatically, it will help a tiny tiny minority of FTB'd who can afford jumbo mortgages. It makes no difference to the rest.

Understand?

SkepticOne

kevin123123 wrote: »

Great post scepticone.From my calculations a secondhand buyer would have paid e37500 stamp duty on a 500k house, but from today that is down to e28125(hopefully my sums are right).this shoud now hopefully revive the slow housing market and put the power in the buyers hands and not the builders and developers. This is good news.Regarding the rest of the budget I beleive it is much better than anticipated.

If we combine these measures with the predicted falls in house prices over the next few years things are slowly improving for buyers provided interest rates remain around their current levels and the credit squeeze resolves itself quickly.

Things should also improve for renters with rental supply set to increase even further as the claw-back period is reduced to two years. This will help tenants as they wait for prices to adjust.

tHE vAGGABOND

The changes to the rent a room scheme will help loads of people too, raising the cieling to over 10k

A very sensible budget tbh

Don't forget the clawback period for stamp duty relief for 1st time buyers has also been reduced to 2 years from the current 5 if say you rent the house out
So that means you can rent out the entire after 2 years instead of 5.

It means that for example if you want to go travelling for a year after 2 years you can now rent out your house without several grand of a clawback hitting you if you have the type of tennant/neighbour thats likely to squeel...

SkepticOne

tHE vAGGABOND wrote: »

The changes to the rent a room scheme will help loads of people too, raising the cieling to over 10k

Yes this will help many people. Perhaps not so great for investors trying to rent out whole properties as these will come under greater competition from owner-occupiers renting rooms in their houses.

SkepticOne

Tristrame wrote: »

It means that for example if you want to go travelling for a year after 2 years you can now rent out your house without several grand of a clawback hitting you if you have the type of tennant/neighbour thats likely to squeel...

The impediments against rental supply are being being reduced which I think everyone will agree is great.

I think possibly the big losers in this budget are investors who maxed out on debt to purchase at the top of the market.

gurramok

Tristrame wrote: »

Don't forget the clawback period for stamp duty relief for 1st time buyers has also been reduced to 2 years from the current 5 if say you rent the house out
So that means you can rent out the entire after 2 years instead of 5.

It means that for example if you want to go travelling for a year after 2 years you can now rent out your house without several grand of a clawback hitting you if you have the type of tennant/neighbour thats likely to squeel...

Something tells me that this will have a 'flooding' effect on the rental market, less wait to not pay a clawback if one wanted to offload that first property to tenants.

MG

Stamp duty changes will have very little effect. House price are overvalued by 20-30%, perhaps more. Knocking 1 or 2% off the effective stamp duty rate will only crystallise a small portion of the reductions that are needed to bring the housing market back to it's fundamentals. It is true to say however, that the the government is subsidising this 2% or so crystallisation.

Those expecting it have a major kickstart impact on the housing sector are likely to be very disappointed. For those anticipating falls, it makes very little economics difference as the falls will happen anyway, these measues just make certain a small portion of the fall and means this portion of the fall is borne by the taxpayer, rather than the individual houseowner.

Watch out for the the CSO figures on construction employment (due out Friday for Oct, though we'll prob have to wait for the Jan figures to see the real signs of a cull). We probably need to shed a third of these workers before we see the bottom of the market.

A Random Walk

This SD change will have no impact but hopefully it will take an excuse away from the property industry who blame SD for falling prices. Prices will continue to fall in 2008 and will pick up speed as people realise that stamp duty "reform" has not had the impact that the EAs told them it would have.

jimmycrackcorm

I personally think the the minister didn't want to dramatically affect the housing market. After all it doesn't serve the economy well to have super growth in prices and the time for significant change is when the market shows signs of bottoming out.

Glenbhoy

SkepticOne wrote: »

The impediments against rental supply are being being reduced which I think everyone will agree is great.

I think possibly the big losers in this budget are investors who maxed out on debt to purchase at the top of the market.

Anecdotal evidence suggests that few people were aware of the clawback, and those that were ignored it, it'll have minimal impact on the rental market. I personally feel maybe it was thrown in there to encourage people to trade up even though they're having great difficulty shifting their current property, the bank will still given them credit for having another property and they'll be able to rent it out without the clawback.
The other issue some of you raise re the mortgage interest relief is a good one too, firstly, the figure of 20,000 relief for a couple sounds really impressive doesn't it, however in monetary terms it's only 4,000 - not bad, but roughly the equivalent of a 1% increase in interest rates over a year on a mortgage of 420K, I mention 420K because that's the size of mortgage one would require (over 30 yrs) in order to take full advantage of this relief. It's not that high, but well above the average house price countrywide.

ciarsd

Did anyone hear Matt Cooper last evening regarding stamp duty?

One listener said he was planning on putting a deposit down on a property selling for €390K - on announcement of the stamp duty changes in the budget, this said property then went up in value to €420K when he enquired yesterday evening..

Is this going to be a widespread practice? - is it greed? - will it keep the current market stagnant, in effect cancelling out any positive effect the changes might have made?

DublinDilbert

ciarsd wrote: »

Did anyone hear Matt Cooper last evening regarding stamp duty?

One listener said he was planning on putting a deposit down on a property selling for €390K - on announcement of the stamp duty changes in the budget, this said property then went up in value to €420K when he enquired yesterday evening..

Is this going to be a widespread practice? - is it greed? - will it keep the current market stagnant, in effect cancelling out any positive effect the changes might have made?

I'd say some seller's who have dropper their prices in the last few months will try chance their arm and up-the asking price, but if anything this will destabilize the market further...

One of the main reasons the current market is in trouble is cause of the lack of first time buyers, which don't pay any stamp duty anyways, hence no real effect there....

For people trading up from an apartment to a house, say paying out €300K will see a reduction in stamp duty of €4K, €4k isn't really much money if your buying a house, some people spend 1/2 that amount on a TV!

SkepticOne

Glenbhoy wrote: »

Anecdotal evidence suggests that few people were aware of the clawback, and those that were ignored it, it'll have minimal impact on the rental market. I personally feel maybe it was thrown in there to encourage people to trade up even though they're having great difficulty shifting their current property, the bank will still given them credit for having another property and they'll be able to rent it out without the clawback.

I would agree with the idea that the reason is to cater to people who can't shift their current property. If this is the case and it works then it is a good thing in my opinion. It frees up the market and allows prices settle at fair value more quickly than otherwise. Those unwilling or unable to sell at current market prices can try to rent out their old place thus increasing rental supply. Anything that makes better use of the existing housing stock is a good thing, imo, even if it is a relatively minor measure as you say.