Reducing investment demand for property by eliminating tax relief on interest.

power101

The UK are reducing the interest tax relief from 100% to 0% over the next four years. Landlords in Ireland currently get 75% relief. In order to increase supply and reduce demand of investors should Ireland not do the same.

https://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords

Less investors buying property which crowds out normal buyers along with more investors selling due to lack of/reducing profitability.

amcalester

Removing landlords doesn't increase the housing supply, it descreases it because the 3 or 4 people who were living in a house share are replaced by a couple or single person.

athtrasna

power101 wrote: »

The UK are reducing the interest tax relief from 100% to 0% over the next four years. Landlords in Ireland currently get 75% relief. In order to increase supply and reduce demand of investors should Ireland not do the same.

https://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords

Less investors buying property which crowds out normal buyers along with more investors selling due to lack of/reducing profitability.

The last budget committed to increasing tax relief on interest so I don't see how you think Ireland could follow suit

4ensic15

athtrasna wrote: »

The last budget committed to increasing tax relief on interest so I don't see how you think Ireland could follow suit

Anything stupid they do in England always comes here quickly after.

Marcusm

power101 wrote: »

The UK are reducing the interest tax relief from 100% to 0% over the next four years. Landlords in Ireland currently get 75% relief. In order to increase supply and reduce demand of investors should Ireland not do the same.

https://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords

Less investors buying property which crowds out normal buyers along with more investors selling due to lack of/reducing profitability.

The problem in the U.K. relate to investor purchased properties many of which are never let. Equally these are often not debt funded but this decision is expected to mollify the outcry concerning scarce availability of properties which is due to lack w levels of construction rather than debt funded investors (who generally provide a good base for rental properties which are an important feature of any property market).

Graham

power101 wrote: »

Less investors buying property which crowds out normal buyers along with more investors selling due to lack of/reducing profitability.

What about the tenants that currently live in those investment properties?

listermint

Graham wrote: »

What about the tenants that currently live in those investment properties?

The property I imagine doesn't disappear...

power101

power101 wrote: »

The UK are reducing the interest tax relief from 100% to 0% over the next four years. Landlords in Ireland currently get 75% relief. In order to increase supply and reduce demand of investors should Ireland not do the same. ..................

Presumably your logic is
- less tax relief less incentive for vulture funds and small time landlords to enter the market
- so property prices fall
- more people get on ladder
- rent falls for the remainder as demand falls

Won't work as we don't have enough housing stock.

Property prices in most of England are really high relative to the ROI and wages over there are lower.

Graham

listermint wrote: »

The property I imagine doesn't disappear...

Where do you imagine the renters go when the number of investment properties reduces dramatically? Or is it just tough luck for anyone who isn't able/doesn't want to buy?

A healthy rental market is necessary for a multitude of reasons.

listermint

Graham wrote: »

Where do you imagine the renters go when the number of investment properties reduces dramatically? Or is it just tough luck for anyone who isn't able/doesn't want to buy?

A healthy rental market is necessary for a multitude of reasons.

They'd be in the property I presume, as I said the property doesn't disappear...

Or is it you saying the property just burns to the ground?

Graham

listermint wrote: »

They'd be in the property I presume, as I said the property doesn't disappear...

Or is it you saying the property just burns to the ground?

In the absence of investors, who do you think will buy the property and let it to tenants?

The topic of the thread is 'Reducing investment demand'.

riclad

Theres 1000,s of accidental landlords left over from the boom, who rely on the loan interest tax credit to survive, People who bought a house for 200k,
its now worth 100k, they are renting it out cos they are in negative equity and cant afford to sell .
Reducing the tax credit would reduce the amount of rental propertys on the market.
And it amounts to tax on landlords., landlords are a;ready heavily taxed .

Peregrinus

Graham wrote: »

In the absence of investors, who do you think will buy the property and let it to tenants?

The topic of the thread is 'Reducing investment demand'.

Yes, but reducing investment demand doesn't increase housing supply. Reducing investment demand will tend to penalise those who rent or wish to rent or need to rent in order to benefit those who wish to buy. If that's your policy objective, fine.

If anything it'sll tend to reduce housing supply, since it will reduce the amount of money investors spend on constructing new houses to let. This won't be replaced by additional money prospective buyers spend constructing new houses to buy, since the proposal doesn't give prospective buyers any more money.

jive

Makes more sense to incentivise investments in stocks/bonds/etc.

At the moment the vast majority invest in property to yield some kind of income with their stock pile of cash. This limits the properties available to FTB who presumably are younger and have lower income/savings.

Government should reduce CGT on stock investments and remove the 'deemed disposal' rule which is ridiculous.

Not only would this help to alleviate the FTB issue but it would also alleviate the issue which we are going to see with pensions, or lack thereof, in the future.

omicron

jive wrote: »

Makes more sense to incentivise investments in stocks/bonds/etc.

At the moment the vast majority invest in property to yield some kind of income with their stock pile of cash. This limits the properties available to FTB who presumably are younger and have lower income/savings.

Government should reduce CGT on stock investments and remove the 'deemed disposal' rule which is ridiculous.

Not only would this help to alleviate the FTB issue but it would also alleviate the issue which we are going to see with pensions, or lack thereof, in the future.

So if investments are reduced, rents go up, first time buyers can't save deposits.

If the government wanted to do anything to relieve the house price and rental price issues they're make a 10yr commitment to not interfering so people could have some idea what to expect.

Terrible idea, it's more tax relief for LLs that's required not less. Also in the last budget the government committed to increasing the relief from 75% to 100% over the next few years so we are going the opposite direction op.

The two main results of getting rid of the tax relief would be less availability of rentals and increased tax evasion.

DubCount

The problem with the Irish property market is an insufficient supply of homes. We have too many people chasing too few houses/apartments. Tackling demand in one area, just shifts a demand problem to another area. The Central Bank rules on mortgages has been successful in curtailing demand for home purchases and house/apartment prices, but it has pushed more people into the private rental sector, and now we have a problem with rental inflation. Anything which pushes Landlords out of the market, pushes up rents further, and increases demand for social housing. Anything that attracts landlords into the market, reduces availability for home owners and pushes up house prices.
The answer to a problem where 200 people are chasing 100 houses is not to shuffle demand from Home Ownership, to Private Rental to Social Housing - its to build another 100 houses. Measures to help supply like compulsory purchase of vacant property, incentives to get people with spare rooms to rent out those rooms, providing cheep credit to property developers, speeding up the planning process - these things help. Changing interest relief on landlords wont add extra supply to the market, and wont help.

antoinolachtnai

Well, there is private money to invest in housing, and that is a great thing from the perspective of a country with a shortage of housing. Surely the key is to get these investors to invest where there money can do the most good, i.e., in building new homes?

If there was a tax structure and if suitable developments were planned which made it viable for every current landlord who has two or more units to buy one newly constructed units, that could largely solve the rental property crisis.

Where I live in Kildare the neighbours' went for in excess of €285k in 2006 (2 bed flat)............ similar one gone sale agreed now, asking was €160k iirc.

Compared to the boom property prices aren't bad in places compared to rent.

In 2007 rentals where I am were €850/month, now they're €1100 ish.

Investors were queuing up back than, not so now due to various reasons, we have a very strange attitude to investing in property in Ireland, very amateurish.

jive

omicron wrote: »

So if investments are reduced, rents go up, first time buyers can't save deposits.

If the government wanted to do anything to relieve the house price and rental price issues they're make a 10yr commitment to not interfering so people could have some idea what to expect.

People invest in other things, property devalues as it's not as appealing an investment and people sell their liquid investments to fund a deposit. Less amateur landlords trying to makeup for their capital losses through high rents whilst pointing the finger at high taxes being the reason.

But everyone would crap the bag if properties began to lose value as it is the only 'certain' money maker in Ireland. Keep buying up properties when there is a short supply until it gets to ridiculous levels and it all goes tits up, again.

Augeo

Augeo wrote: »

Where I live in Kildare the neighbours' went for in excess of €285k in 2006 (2 bed flat)............ similar one gone sale agreed now, asking was €160k iirc.

Compared to the boom property prices aren't bad in places compared to rent.

In 2007 rentals where I am were €850/month, now they're €1100 ish.

Investors were queuing up back than, not so now due to various reasons, we have a very strange attitude to investing in property in Ireland, very amateurish.

How is any of that amateurish? Availability of credit has collapsed, and taxes and charges gone up so it surely makes sense for landlords to stay out of the market?

Personally I think there are opportunities for investors out there, but even if I had the money I think residential rentals in this country rely on capital appreciation to make it worthwhile and that doesn't look likely in the medium term.

Augeo

Augeo wrote: »

Where I live in Kildare the neighbours' went for in excess of €285k in 2006 (2 bed flat)............ similar one gone sale agreed now, asking was €160k iirc.

Compared to the boom property prices aren't bad in places compared to rent.

In 2007 rentals where I am were €850/month, now they're €1100 ish.

Investors were queuing up back than, not so now due to various reasons, we have a very strange attitude to investing in property in Ireland, very amateurish.

Deleted User wrote: »

How is any of that amateurish? Availability of credit has collapsed, and taxes and charges gone up so it surely makes sense for landlords to stay out of the market?

Personally I think there are opportunities for investors out there, but even if I had the money I think residential rentals in this country rely on capital appreciation to make it worthwhile and that doesn't look likely in the medium term.

It should be obvious

I've bolded some pieces for you, conceptually an investment requiring €160k either up front or borrowed should never be viewed on anything but a longterm IMO

Queuing up with a 3.5% ROI is lunacy IMO, your's too no doubt.

Graham

Augeo wrote: »

It should be obvious

I've bolded some pieces for you

I'm reading along but I have absolutely no clue what point you're trying to make.

Augeo wrote: »

an investment requiring €160k either up front or borrowed should never be viewed on anything but a longterm IMO

True, did someone suggest otherwise?

Augeo wrote: »

Queuing up with a 3.5% ROI is lunacy IMO, your's too no doubt.

are people queuing up for a 3.5% return?

Augeo

Augeo wrote: »

It should be obvious

I've bolded some pieces for you, conceptually an investment requiring €160k either up front or borrowed should never be viewed on anything but a longterm IMO

Queuing up with a 3.5% ROI is lunacy IMO, your's too no doubt.

There's no need to bold anything I've read your post, what you've added is a mixture of the obvious or irrelevant, so I'm out.

Graham

Graham wrote: »

............
True, did someone suggest otherwise?

Mention of medium term here.

Deleted User wrote: »

...I think residential rentals in this country rely on capital appreciation to make it worthwhile and that doesn't look likely in the medium term.

Graham wrote: »

............

are people queuing up for a 3.5% return?

I was referring to the

Augeo wrote: »

€285k in 2006 (2 bed flat).......................

In 2007 rentals where I am were €850/month............

.

Graham wrote: »

I'm reading along but I have absolutely no clue what point you're trying to make.

Here you go....

Augeo wrote: »

...........we have a very strange attitude to investing in property in Ireland, very amateurish.

Graham

Augeo wrote: »

I was referring to the .

Somebody suggested capital appreciation is unlikely in the medium term. I'm not convinced that supports your 'amateur landlord' theory.

Graham

Graham wrote: »

Somebody suggested capital appreciation is unlikely in the medium term. I'm not convinced that supports your 'amateur landlord' theory.

So you essentially disagree that ........we have a very strange attitude to investing in property in Ireland, very amateurish.

There are many landlords who bought in at the 3 / 4 % ROI stage using borrowed capital.

That's amateurish IMO


Someone suggesting capital appreciation is unlikely in the medium term has nothing to do with my amateur landlord theory.

newacc2015

As it is in Ireland, there is two types of property investors. There are the small landlords, who have bought houses over the years thinking it was a sound investment and can barely cover their mortgage. They pay a ton in tax and create a large indirect industry eg insurance, repairs, finance, lettings etc

Then there are the funds. They are often not more than a letterbox in the IFSC or a 'charity' registered by a dodgy law firm in Dublin 1/2. They have brought tens of thousands of distressed properties in the middle of the recession for a fraction of their worth. With the use of exotic structures, they are paying no tax on their rental incomes or when they flip the properties.

OP what you are suggesting is penalising the already screwed small investors by penalising them with tax. While dodgy funds continue to rent their cheaply bought apartments tax free. Where is the societal benefit in that?

riclad

Most rental units are owned by landlords ,vulture funds were able to buy 100,S of
houses from nama at a discount and can avoid paying tax on rental income
by being based outside ireland .

The_Conductor

newacc2015 wrote: »

OP what you are suggesting is penalising the already screwed small investors by penalising them with tax. While dodgy funds continue to rent their cheaply bought apartments tax free. Where is the societal benefit in that?

How about taxing gross rental income from residential lettings at our current rate of corporation tax (12.5%) and not allowing anyone at all, any deductions of any nature. So- the vulture funds are treated in an identical manner to any other landlord- and everyone's tax return is so much easier to calculate- because there is no crap about deductions, allowable interest, depreciation of capital goods etc etc- its simply a flatrate 12.5% on the gross rental income?

I know its not a terribly high percentage- however, I do think its fair and in all probability may result in a higher tax take than the current mess.

quadrifoglio verde

Wouldn't it be 25% due to bring derived from rental income?

riclad

There are landlords out there who bought in the boom, who are in large negative equity ,any reductions in interest rates would be a disaster
for them and would drive then out of the rental business .
If the government wanted to discourage investors or vulture funds ,
say you can only get tax credits on 2 house,s , or apartments .
After 2 units there may be reduced tax credits on new buildings
bought as rental investments .
but does it make sense to discourage investment in new rental
propertys ,
Since more propertys built may mean reduced average rents in an area.