Property Market 2019

Eric Cartman

The_Conductor wrote: »

Its a matter of time before the REITs will be gently informed they have to supply X amount of social housing- and they'll tell the Minister to take a hike- and it'll end up in court. The absolute number of properties to let- is falling- as the new units coming onstream by the REITs and other large landlords- are insufficient to offset those exiting the sector.

Your analogy about sawing the branch you're standing on- is very very apt.

There is just no way to put 'mixed housing' or 'providing social housing' on your investment prospects and not completely sour potential clients.

The reality is that unless something drastic is done to make it worthwhile for landlords to re-enter the market here, rent is just going to continue to out track wage inflation and supply decrease.
Any other kind of factors to limit rents or rental increases will only exacerbate the problem.

A solution I would propose is to make rental income actually work in a business sense, set it as a limited company and allow all expenses out of it. pay 12.5% on unremunerated funds, job done.

coolshannagh28

The_Conductor wrote: »

Its a matter of time before the REITs will be gently informed they have to supply X amount of social housing- and they'll tell the Minister to take a hike- and it'll end up in court. The absolute number of properties to let- is falling- as the new units coming onstream by the REITs and other large landlords- are insufficient to offset those exiting the sector.

Your analogy about sawing the branch you're standing on- is very very apt.

The Govt has tried to achieve in a less than a decade what has taken tens of decades even centuries in other countries ; a large scale stable, institutional rental market mainly at the behest of our bailout partners and the US .
The strategy seems to be failing as the institutions are the wrong kind and are too greedy for short term gain .

The_Conductor

Eric Cartman wrote: »

There is just no way to put 'mixed housing' or 'providing social housing' on your investment prospects and not completely sour potential clients.

However- its the road they're traveling. The platitudes they used on small scale landlords- simply aren't going to cut it with large corporate entities. People are just going to have accept that the old expression about being careful what you wish for- came from someone who was both wise, and had had a bitter experience.

The private sector should never have shouldered the burden of providing for social and mixed tenancies- and now, as its going tits up because of supply falling at an increasing velocity- the Minister is going to play mindgames and blame the private sector for not stepping up to the plate and providing all those social housing units that he made it impossible for the private sector to run.

We need a mature discussion on housing in this country- in a similar manner to the discussion we need on social welfare, the contributory and the non-contributory old age pensions- and a myriad of other matters that are being allowed gently fester in the corner- and woe betide anyone who mentions them.

The regulatory regime for letting property in Ireland is toxic- plain and simple- and the suggestions are that its going to get a whole lot worse before it gets any better. The irony is- as the system is failing- the selfsame landlords are being blamed for not going along with it.

The Minister is probably biding his time- there will be an election before too long- and then it'll simply be someone else's problem.

Eric Cartman

The_Conductor wrote: »

However- its the road they're traveling. The platitudes they used on small scale landlords- simply aren't going to cut it with large corporate entities. People are just going to have accept that the old expression about being careful what you wish for- came from someone who was both wise, and had had a bitter experience.

The private sector should never have shouldered the burden of providing for social and mixed tenancies- and now, as its going tits up because of supply falling at an increasing velocity- the Minister is going to play mindgames and blame the private sector for not stepping up to the plate and providing all those social housing units that he made it impossible for the private sector to run.

We need a mature discussion on housing in this country- in a similar manner to the discussion we need on social welfare, the contributory and the non-contributory old age pensions- and a myriad of other matters that are being allowed gently fester in the corner- and woe betide anyone who mentions them.

The regulatory regime for letting property in Ireland is toxic- plain and simple- and the suggestions are that its going to get a whole lot worse before it gets any better. The irony is- as the system is failing- the selfsame landlords are being blamed for not going along with it.

The Minister is probably biding his time- there will be an election before too long- and then it'll simply be someone else's problem.

Leavign the crisis at its peak though is an election nightmare , "how many social houses do you commit to building" is going to be a big one on the doors and the tv debates, and when a realistic politician says say 15,000 , its all too easy for people to get washed away by some paul murphy esqe dream about a state run building company and reposessed free land and making 50,000 gafs in dublin available for the great unwashed.

There will be new people putting their arse on dail seats next election because of an unrealistic promise or flat out lie about how many free gaf's the locals are going to get. But thats one political dick swinging contest that FG can't play, theyve shown their hand.

myshirt

The REITs and large home builders are not telling the Gov to go take a hike though. They are delivering the units like they have to. Everyone else in the development covers any lost margin. Basically they chip in to cover the cost of the social house.

Now I haven't looked into it in any great detail, but you hear this pub talk of developers offering all the units in off-site locations. Donabate for example is becoming a dumping ground for social housing, be it direct supply to the Council or via supply to a REIT for onward HAP rental to the State. These units would be better spread across the actual developments, though I take the point that it's in both the councils interest and the developers that the Part V given over is affordable. Council would prefer 10 units at 300 a piece rather than 5 at 600 a piece.

Eric Cartman

myshirt wrote: »

The REITs and large home builders are not telling the Gov to go take a hike though. They are delivering the units like they have to. Everyone else in the development covers any lost margin. Basically they chip in to cover the cost of the social house.

Now I haven't looked into it in any great detail, but you hear this pub talk of developers offering all the units in off-site locations. Donabate for example is becoming a dumping ground for social housing, be it direct supply to the Council or via supply to a REIT for onward HAP rental to the State. These units would be better spread across the actual developments, though I take the point that it's in both the councils interest and the developers that the Part V given over is affordable. Council would prefer 10 units at 300 a piece rather than 5 at 600 a piece.

The off-siting of the units is a better option though. Lots of stories at the moment about london where the social tenants have a side entrance down an alley way, segregated playgrounds for kids, no access to the gym etc... on site. Understandible as theres no way they could afford the management fees, but even for optics its better to leave the premium block for those who can afford it and the social housing off site where you don't have to segregate at the same building.

hmmm

coolshannagh28 wrote: »

The Govt has tried to achieve in a less than a decade what has taken tens of decades even centuries in other countries ; a large scale stable, institutional rental market mainly at the behest of our bailout partners and the US .

If it is a deliberate strategy (convert the rental market to one where large corporates dominate), I think it is the correct strategy. We've debated it a million times on here, but we've heard endless complaints about the Irish "amateur landlord" and their cavalier attitude towards the rules and their clients. A landlord with 400 units to rent can bring you a really great rental experience (although expensive).

The right way to do that was to ease the amateurs out of the market over time, but they've dropped the hammer almost out of the blue. This suggests to me that it isn't a proper strategy, they are hopping from short term fix to short term fix, and are completely clueless as to how their actions are impacting on the market.

Unfortunately the alternative political parties are even worse.

voluntary

hmmm wrote: »

If it is a deliberate strategy (convert the rental market to one where large corporates dominate), I think it is the correct strategy. We've debated it a million times on here, but we've heard endless complaints about the Irish "amateur landlord" and their cavalier attitude towards the rules and their clients. A landlord with 400 units to rent can bring you a really great rental experience (although expensive).

The right way to do that was to ease the amateurs out of the market over time, but they've dropped the hammer almost out of the blue. This suggests to me that it isn't a proper strategy, they are hopping from short term fix to short term fix, and are completely clueless as to how their actions are impacting on the market.

Unfortunately the alternative political parties are even worse.

We need both: institutional and private landlords. Let competition forces do the work. Private landlords can put a downside pressure on rents, while institutional LLs can raise a bar in terms of quality. It's a win-win scenario. Nobody sane would try to limit the competition in this market. Unless he's driven by his own vested interest or undisclosed motivations.

If private LLs will be so bad and institutional LLs so good, then surely nobody will rent from private LLs, right? Unless they offer some other value, like cheap accommodation for whoever cannot afford the excellent penthouses with receptions and security and gym and swimming pool on site and all the expensive shiny extras?

Askthe EA

voluntary wrote: »

Unless they offer some other value, like cheap accommodation for whoever cannot afford the excellent penthouses with receptions and security and gym and swimming pool on site and all the expensive shiny extras?

Ya, like houses. The REITs have no interest in houses as they require too much managing. If you want a garden then its going to be a private landlord you need.

Yurt2

This article strikes a cautious tone. I doubt we'll ever see a collapse on the scale of post-2008, but the signs are a significant correction could come in the next year or so, particularly once Brexit complications make themselves known to the wider economy.

As the article hints at, labour and materials haven't increased significantly, the price (hope value) of land has gone a bit haywire, driving up the cost of new builds and ultimately stretching borrowers. Wage inflation is probably all maxed out as well.

EDIT: Forgot to include link...

https://www.irishtimes.com/business/economy/opinion-ireland-s-property-rush-risks-repeat-of-crisis-1.3845318?fbclid=IwAR0k2C3Ecrq0H6nt90NQs7FJmrelfsPAMSpbSD3ju8jN06OLVsPt3P4Ub3c

Bluefoam

Yurt! wrote: »

This article strikes a cautious tone. I doubt we'll ever see a collapse on the scale of post-2008, but the signs are a significant correction could come in the next year or so, particularly once Brexit complications make themselves known to the wider economy.

As the article hints at, labour and materials haven't increased significantly, the price (hope value) of land has gone a bit haywire, driving up the cost of new builds and ultimately stretching borrowers. Wage inflation is probably all maxed out as well.

EDIT: Forgot to include link...

https://www.irishtimes.com/business/economy/opinion-ireland-s-property-rush-risks-repeat-of-crisis-1.3845318?fbclid=IwAR0k2C3Ecrq0H6nt90NQs7FJmrelfsPAMSpbSD3ju8jN06OLVsPt3P4Ub3c

Article is behind a paywall... care to give us some insights?

Yurt2

Bluefoam wrote: »

Article is behind a paywall... care to give us some insights?

Opening in incognito gets around the IT paywall (unless it's subscriber only).


Bloomberg also carried the article...


https://www.bloomberg.com/news/features/2019-04-01/ireland-property-rush-risks-repeat-of-crisis

tomfoolery60

Askthe EA wrote: »

Ya, like houses. The REITs have no interest in houses as they require too much managing. If you want a garden then its going to be a private landlord you need.

IRES just bought a load of houses from Glenveagh complete with gardens that they are going to rent : https://www.rte.ie/news/business/2019/0325/1038393-glenveagh-ires-deal/

voluntary

tomfoolery60 wrote: »

IRES just bought a load of houses from Glenveagh complete with gardens that they are going to rent : https://www.rte.ie/news/business/2019/0325/1038393-glenveagh-ires-deal/

Revenue.ie website:
"REITs are companies who earn rental income from commercial or residential property. They are generally exempt from Corporation Tax (CT) on income from their property rental business only. Also they are generally exempt from chargeable gains made on the disposal of assets of their property rental business only."

Private landlords:
50% tax/prsi/usc on rental income.

Irish people accept that?

beauf

I assume this is what happened in the UK. Was it on the same scale as it's happening here. It feels like there's shift in ownership not simply in housing but in land ownership in Ireland urban and rural.

coolshannagh28

voluntary wrote: »

Revenue.ie website:
"REITs are companies who earn rental income from commercial or residential property. They are generally exempt from Corporation Tax (CT) on income from their property rental business only. Also they are generally exempt from chargeable gains made on the disposal of assets of their property rental business only."

Private landlords:
50% tax/prsi/usc on rental income.

Irish people accept that?

Social engineering Irish style.

The Student

beauf wrote: »

I assume this is what happened in the UK. Was it on the same scale as it's happening here. It feels like there's shift in ownership not simply in housing but in land ownership in Ireland urban and rural.

It seems so. We have proven we are incapable of having a viable housing policy in Ireland be it renting, private housing or social housing.

Tenants who don't pay their rent get to live rent free because of the RTB and the whole delay in evictions, private housing who don't pay mortgages who are not evicted even when a court order is obtained and social housing tenants who are in arrears with their rent.

The Govt and the State have proven they are incapable of dealing with the housing situation. The institutional investors will be a lot more ruthless with rent defaulters & mortgage defaulters.

The Govt is unwilling to actually "grasp the nettle" and make some difficult decisions. There are a lot of genuine people struggling and there are a small number abusing the system but we are unwilling to call them out on it.

Unless the State changes it attitude it will leave the housing of people up to institutional landlords and those people looking to rent/purchase property may well end up regretting the States inaction on evictions for non payment of rent or mortgage in all sectors of society.

voluntary

Two obvious solutions to rapidly increase rental properties supply:

1. Opt-in tax treatment on private rental income. Maybe 8-10% on rent collected (no expenses allowed). Opt-in, as landlords could still opt for a regular income tax.
2. Address the trouble making or non-paying tenants issue. If the State wants landlords to keep non paying tenants in their houses, then maybe State should also pay their rent?

AlmightyCushion

voluntary wrote: »

Revenue.ie website:
"REITs are companies who earn rental income from commercial or residential property. They are generally exempt from Corporation Tax (CT) on income from their property rental business only. Also they are generally exempt from chargeable gains made on the disposal of assets of their property rental business only."

Private landlords:
50% tax/prsi/usc on rental income.

Irish people accept that?

You're leaving out that REITs must distribute at least 85% if their income to shareholders. Those shareholders will then pay tax/PRSI/USC on those dividends.

The Student

voluntary wrote: »

Two obvious solutions to rapidly increase rental properties supply:

1. Opt-in tax treatment on private rental income. Maybe 8-10% on rent collected (no expenses allowed). Opt-in, as landlords could still opt for a regular income tax.
2. Address the trouble making or non-paying tenants issue. If the State wants landlords to keep non paying tenants in their houses, then maybe State should also pay their rent?

The opt in tax treatment would be unfair as it would act as a disincentive to make repairs/improvements as it could not be written off against tax.

I have suggested extending the rent a room scheme to the Minister via the housing forum last year.

At its most basic level you pay no tax on any rent up to €1000 (for example) anything above that you pay tax on the whole amount. This way tenants who are currently paying €2000 will only have to pay €1000 (as this is what the landlord is taking after tax etc so no difference for the landlords.

The tenant has €1000 (€2000 - €1000) extra each month to either spend or save. If they are saving this will go towards a deposit so its a win win for both the tenant and the landlord and eventually the State as the tenant will be able to purchase their own property and not be relying on the State to house them.

I completely agree with dealing with the troublesome tenants but no politician will touch this topic as it would be political suicide.

awec

The Student wrote: »

The opt in tax treatment would be unfair as it would act as a disincentive to make repairs/improvements as it could not be written off against tax.

I have suggested extending the rent a room scheme to the Minister via the housing forum last year.

At its most basic level you pay no tax on any rent up to €1000 (for example) anything above that you pay tax on the whole amount. This way tenants who are currently paying €2000 will only have to pay €1000 (as this is what the landlord is taking after tax etc so no difference for the landlords.

The tenant has €1000 (€2000 - €1000) extra each month to either spend or save. If they are saving this will go towards a deposit so its a win win for both the tenant and the landlord and eventually the State as the tenant will be able to purchase their own property and not be relying on the State to house them.

I completely agree with dealing with the troublesome tenants but no politician will touch this topic as it would be political suicide.

Government won't do this, because what's most likely to happen is the tenant's rent stays at €2000 and the landlord just pockets the extra €1000.

Giving landlords a tax break and then expecting them to pass it all on to tenants is naive.

voluntary

AlmightyCushion wrote: »

You're leaving out that REITs must distribute at least 85% if their income to shareholders. Those shareholders will then pay tax/PRSI/USC on those dividends.

If they were tax residend in Ireland then maybe. But are they?

voluntary

awec wrote: »

Government won't do this, because what's most likely to happen is the tenant's rent stays at €2000 and the landlord just pockets the extra €1000.

Giving landlords a tax break and then expecting them to pass it all on to tenants is naive.

Well, doubling the profit would surely brought plenty of new supply to the market, right? Simple economics.

Amirani

voluntary wrote: »

If they were tax residend in Ireland then maybe. But are they?

Are all private landlords tax resident in Ireland?

jay0109

For years we listened to Commentators and Politicians calling for the 'professionalisation' of the Irish landlord, that there was too many amateurs in the market renting out 1 house each.

Well, be careful what you wish for

Cryptopagan

voluntary wrote: »

If they were tax residend in Ireland then maybe. But are they?

They are subject to Dividend Withholding Tax whether they are resident in Ireland or not.

voluntary

Cryptopagan wrote: »

They are subject to Dividend Withholding Tax whether they are resident in Ireland or not.

I don't like quoting SF sources, but it came up first in the google:

"Foreign REIT investors paid between 2% and 3% effective tax on €238 million of property profits in 2015 – Doherty"

“The only tax paid by foreign REIT shareholders is Dividend Withholding Tax (DWT), when dividends are paid to them. The rates of DWT for foreign investors vary from 20% to 15% to 0%. "


“It is a scandal that foreign investors in REITs earned €238 million in profits from their Irish property holdings in 2015, but in the same year, these investors only paid €5.27 million tax to the State, an effective tax rate of 2%.

“Furthermore, foreign investors are not liable to Capital Gains Tax on the disposal of REIT shares"
https://www.sinnfein.ie/contents/45147

Would the above be factually incorrect?

Browney7

voluntary wrote: »

I don't like quoting SF sources, but it came up first in the google:

"Foreign REIT investors paid between 2% and 3% effective tax on €238 million of property profits in 2015 – Doherty"

“The only tax paid by foreign REIT shareholders is Dividend Withholding Tax (DWT), when dividends are paid to them. The rates of DWT for foreign investors vary from 20% to 15% to 0%. "


“It is a scandal that foreign investors in REITs earned €238 million in profits from their Irish property holdings in 2015, but in the same year, these investors only paid €5.27 million tax to the State, an effective tax rate of 2%.

“Furthermore, foreign investors are not liable to Capital Gains Tax on the disposal of REIT shares"
https://www.sinnfein.ie/contents/45147

Would the above be factually incorrect?

It would be correct. Charities and pension funds would be in the zero % category. In ways, it's no different than an Irish domiciled pension fund investing in REITs (or any other class of investment) which are active in other jurisdictions accruing gains on a tax free basis and repatriating to Ireland.

Also, an individual, tax resident in Ireland who buys shares in Irish REITs would declare the full dividend (before DWT) as income which is taxable at their marginal rate and they would get a relief for the 20% DWT paid on their behalf so they are not taxed at a rate higher than their marginal rate. CGT would be payable on gains in the share price after deduction of any reliefs and allowances. Pension funds typically do not pay tax on gains as the money that is distributed from them is liable to tax.

Amirani

jay0109 wrote: »

For years we listened to Commentators and Politicians calling for the 'professionalisation' of the Irish landlord, that there was too many amateurs in the market renting out 1 house each.

Well, be careful what you wish for

We're in a better situation now than we were previously with respective to the variety of landlords. This is being masked somewhat by the lack of supply across the board, which is causing all the main issues we're seeing.

The Student

awec wrote: »

Government won't do this, because what's most likely to happen is the tenant's rent stays at €2000 and the landlord just pockets the extra €1000.

Giving landlords a tax break and then expecting them to pass it all on to tenants is naive.

That's were Revenue comes in the tenant pays the landlord the €2k and gets a Tax credit of €1k per month from Revenue. The landlord gets the €2k and submits the €2k as income and gets a tax credit of €1k.

This way all tenants will benefit and all landlords will be forced to submit tax returns. Any landlord who is not submitting tax returns up to now is not going to so this will make no difference but those who are will see no difference in their net of tax take and the tenant is benefitting to the tune of €1k tax credit per month.

This €1k tenant credit could go into a deposit fund for a property that the Govt hold on behalf of the tenant until the tenant is ready/able to purchase.