Irish Property Market chat II - *read mod note post #1 before posting*

https://www.boards.ie/discussion/comment/120606536#Comment_120606536

Everything is relative, if johnnychimpo is talking about trading up to an expensive/luxury house which is a discretionary purchase, then in a recession, that type of house is likely to drop more in value, but if he/she is talking about a more expensive house which would be popular with other buyers who just want more room, or in a better area, then it’s hard to see how the factors which affect the price of that house would be any different to the factors affecting a similar price drop on his existing house. And, as others have said, the shock to our financial system which would be needed to reduce prices by a significant amount would likely be associated with job losses and wage reductions.

Which brings me back to the point of mine that johnnychimpo responded to, it’s all good and well to say we want prices to fall so that younger people/average income earners can buy a home, but we just don’t want it to have any affect on our own houses/income. So it isn’t just FFG who have a vested interest in house prices remaining stable/high, all property/home owners do as well.

RichardAnd

https://www.boards.ie/discussion/comment/120606506#Comment_120606506

I agree on your first point. Anything that causes a 2008-like crash will not happen in a vacuum. However, I think that most people who would like to see a crash know that. If it's a choice between continued growth and ever increasing prices or a crash with the risk of unemployment, it's rather a choice between the lesser of two evils. If one is in a position where they are paying most of their income to rent poor accommodation, a crash doesn't seem so bad.

Personally speaking, in 2009, I was able to rent a nice room in a house with a private bathroom for just 20% of my monthly income from a minimum wage job (in Athlone). Granted, many people were in a bad position in 2009, but if I were renting today, I'd be willing to take my chances with another crash.

Of course, 2008 was a different beast...

Nermal

https://www.boards.ie/discussion/comment/120606588#Comment_120606588

If prices fall 20% across the board, anyone looking to trade up saves more in absolute terms on the more expensive property they acquire than they lose on the cheaper one they sell.

You should only cheer high prices if you're going to be a net seller of property for the remainder of your lifespan.

Bass Reeves

https://www.boards.ie/discussion/comment/120606536#Comment_120606536

That seems quite simple. Generally people trading up are from smaller houses or from apartments. Apartments generally preform poorly in a crash and often fall further than one might think. A lot of people trading up will be from HTB's funded new houses. These always trade at 30 k lower than a new house in the same development so usually the first 1-2 years of house inflation will not benefit them

Say they are in there house ten years,paid 200k and it's worth 400k. If the equity they have after fees is about 190k. If it drops 15% they have only about 110k in equity after sale

OEP

https://www.boards.ie/discussion/comment/120606674#Comment_120606674

They don't fall linearly across the board though

Bass Reeves

https://www.boards.ie/discussion/comment/120606481#Comment_120606481

People who think propose solutions like this never really think about the brain fart they propose

Even the thinking of taxing those on household incomes of 100k @1% is flawed. This is virtually the minimum that any couple buying would need in Income. So you buy a 450k house and need to find 4.5k on top of the mortgage to fund it every year out of take home income. That for a couple with two incomes of 50k each

I do not know any country that has property tax in the 1% bracket not to mind 3%. As I said a brain fart by @Blut2

Villa05

On the prices rising/falling argument for those trading up.

1 as stated more expensive houses fall faster than entry level housing in a correction. More buyers for your home less for the bigger home

2 those trading up don't have the gun to the head of current market rents, so waiting is an option and saving is easier

3 trader uppers don't buy last year and decide to trade up this year, they will have significant equity built up between 5 and 10 years through appreciation and paying down mortgage

4 the more trading up that occurs, the more stock that is available for new entrants. A more fluid market is a more healthy market

Posts by @Dav010 and @Bass Reeves may have an element of truth in them if we had a repeat of 08, where the banks and the state were effectively bankrupt, so those propping up the bubble were eliminated.

In truth the vast majority of homeowners would be much better off were the market stable and affordable as they derive most/all of their income from work. A stable housing market allows them to move easily between jobs and locations and protects them from government sponsored boom bust policies

timmyntc

https://www.boards.ie/discussion/comment/120606680#Comment_120606680

The problem here is you only mention the equity drop and not the drop in prices of the house they want to trade up to.

Higher end houses have further to fall pricewise, so any fall in equity will be met by falls in asking price of the house they want to buy, in some cases moreso.

House equity does not exist in a vacuum, if you sell you will need to buy again somewhere else, unless of course you are the investor class which isnt relevant here.

Brasso

CSO property price index released now for March. National annual increase of 3.9% (was at 5% for February), in Dublin the increase was 1.7% (was 3.2% in February). March figures probably still represent a lot of deals made before the new year though, so the competing effects of the new 4x limit and higher interest rates might not have had much of an impact on these figures.

Blut2

https://www.boards.ie/discussion/comment/120606481#Comment_120606481

They'd be more than entitled under such a system to defer paying the property taxes until the house is sold/transferred, if they weren't cash liquid. But someone earning €300k a year isn't exactly likely to be struggling. Theres also nobody forcing said person to live in such an expensive house - its entirely a personal choice if someone wants to live in a multi-million euro house. Are people who drive Ferraris being unfairly charged a higher rate of motor tax than people who drive Ford Mondeos? Because its the exact same principle.

@Bass Reeves plenty of places have property taxes in excess of 1%. In New Jersey its 2.49% per year, in Illinois 2.27%. In France its up to 1.7%. In Chile its up to 2% etc. Theres nothing remotely unusual or controversial about it.

We're going to have to figure out some way to prevent foreign investors flooding the market here as has happened in countless other cities like Vancouver or London. And ideally something to encourage downsizing while we're at it. Short of property taxes with exemptions for low and middle earning tax residents I haven't heard of any better ideas.

Nermal

https://www.boards.ie/discussion/comment/120606715#Comment_120606715

Plenty of states in the US with effective property taxes substantially in excess of 1%.

Bass Reeves

https://www.boards.ie/discussion/comment/120607150#Comment_120607150

https://www.boards.ie/discussion/comment/120607142#Comment_120607142

The US has very low personal tax and Vat rates. As well PT in the US often funds education up to post primary level. Therefore people often downsize as they get old and move to Florida which has relatively low PT. You cannot have high personal tax and PT. In a lot of countries @Blut2 suggests PT is actually a barrier to house ownership by lower income couples. Iow personal taxation rates actually benefits the well off

DownByTheGarden

Interest rates surely have to have an effect on affordability. How much of an effect though I dont know.

A couple I know who returned from Australia have been waiting for property prices to come down for about 6 years now while they rent here. They are still waiting. And the more prioces go up the more they feel they have to wait. But in truth I think between the rent they are paying now and the interest rates I think that the properties they would have wanted are now beyond them. As much as they save, prices are running away on them. Add interest rates to that and I think they are out of the current market and not by choice this time.

And the worst part of it is that they are both 40 years old now, so their potential mortgage payments will be getting higher the longer they wait because of that too.

So there are definitely a lot of people getting dumped out of the bidding for property simply because they cannot afford that property anymore. It doesnt seem to be having an effect on prices yet because there is still a steady stream of buyers, but I feel if interest rates go up much more there are going to have to be price adjustments. Or more likely more REITs will be in to buy up houses and apartments. The councils too.

There is just demand from all directions now, even with people dropping out.

combat14

https://www.boards.ie/discussion/comment/120607188#Comment_120607188

affordability is definitely dropping with each rate rise

more and more anecdotal stories of young people in their 30s giving up hope on buying a house and deciding to travel instead

Property prices fall for third month in a row

The property market is slowing down as mortgage rate hikes impact the market.

https://m.independent.ie/business/personal-finance/property-prices-fall-for-third-month-in-a-row/a1276061782.html

Bass Reeves

https://www.boards.ie/discussion/comment/120607120#Comment_120607120

It's hard to tell yet as properties bought in January/ February will probably be only going through finalisation now.

Bakharwaldog

https://www.boards.ie/discussion/comment/120607120#Comment_120607120

6th monthly decrease in property prices in Dublin in a row. Interestingly houses saw a larger monthly drop than apartments. Last time we saw 6 months of decreases was in 2008 and that led to 33 months of monthly decreases.

Expect to see media outlets only quote the headline YoY growth figure of 1.7% (for better or worse)

EDIT: I was wrong https://www.independent.ie/business/personal-finance/property-prices-fall-for-third-month-in-a-row/a1276061782.html

Also of note is that February saw the highest volume of Dublin second hand sales since records began in 2010 and highest January volume since 2014

DataDude

https://www.boards.ie/discussion/comment/120607142#Comment_120607142

Two things in Ireland are true:

We have one of the most progressive income tax systems in the world with an incredibly narrow tax base where a smallish number of high earners pay for everything.

We have the highest level of under occupied homes because of older people with low incomes living in massive houses too big for their needs.

Your proposal has negative implications for both. Force all the younger high earning couple with families out of their big homes because they can’t afford to pay crippling income and property taxes. Older people in €2m houses in Dalkey exempt as they have low incomes.

Ireland is already bleeding high income earners for everything. There’s only so much blood you can take from this cohort - well proven around the world. It’s very easy to just pick an arbitrary income point (usually a point above where the proposer earns funnily enough) and say tax them more. There’s unlikely to be any other country in the world where someone on €200k+ pays so much income tax for such crap public service. And if they lose their jobs, social welfare not even linked to their income despite PRSI being paid on the full amount.

We earn in the €300k+ territory and if I was landed with a further €45k tax bill every year to go on top of my €150k+ income tax bill - I’d be booking the plane ticket tomorrow, as would many in my boat I expect.

DownByTheGarden

https://www.boards.ie/discussion/comment/120607227#Comment_120607227

So true. So much so that myself and my wife have decided to go on the dole for a couple of years. Sick of paying so much tax. Feel like im working for the state. Might as well let them pay some of it back now and have 40 hours each back to ourselves every week.

JohnnyChimpo

https://www.boards.ie/discussion/comment/120607271#Comment_120607271

Bet you didn't

combat14

https://www.boards.ie/discussion/comment/120607225#Comment_120607225

persistent high inflation coupled with high house prices and multiple rate rises definitely hitting some would be buyers

recent job insecurity in tech industry etc. may also be affecting some buyers

DownByTheGarden

https://www.boards.ie/discussion/comment/120607431#Comment_120607431

Bet I did :)

Villa05

https://www.boards.ie/discussion/comment/120605142#Comment_120605142

Profit for bank, investment fund, developer, builder.

State has money coming out it's ears and is perplexed about what to do with

Government number 1 and 2 priority is housing and inflation

Housing is the greatest cost for most families up and down the country

What is the definition of clueless?

DownByTheGarden

https://www.boards.ie/discussion/comment/120607489#Comment_120607489

Agree that inflation has to have some effect. Especially as high as it has gone.

But tech jobs are not in trouble at all. Anyone in tech who has lost their job so far - the only reason they wont have a new job already is if they dont want one.

FernandoTorres

We're getting close to the point where the Irish Times are no longer going to be able to use the 12 month change to frame the narrative of prices increasing. I'm not sure what they're going to do!

Villa05

https://www.boards.ie/discussion/comment/120607227#Comment_120607227

How would you feel about a reduction in your paye to offset a rise in property tax.

Rebalance taxation between land labour and capital. Labour is by far carrying too much of the load

fliball123

https://www.boards.ie/discussion/comment/120607120#Comment_120607120

Another monthly price drop of .6% have yet to drill into the report but if Dublin prices drops this would make it 6 months in a row that Dublin property prices have dropped.

fliball123

https://www.boards.ie/discussion/comment/120607188#Comment_120607188

Prices are dropping do so they if they keep waiting they may save themselves a nice chunk of change

Nermal

https://www.boards.ie/discussion/comment/120607733#Comment_120607733

A 1% property tax would raise about €7B a year.

We could cut income tax rates by a quarter.

DataDude

https://www.boards.ie/discussion/comment/120607733#Comment_120607733

Would hugely support this and true wealth taxes over incomes clearly has tonnes of advantages. Concerns I’d have:

Most people comically undervalue their homes for the current property tax calculation (it’s so irrelevantly small anyway that this hardly matters). This would need to be more tightly enforced or else it would be a very unfair tax.

There would be countless sad stories. ‘My state pension won’t cover the tax bill on my house on Ailesbury road’ ‘I inherited my parents house in Ranleagh but I’m a single mum’ etc. For the tax to be taken seriously you’d need to be able to take the property to pay it. As unlike income tax it can’t be deducted at source.

Zero chance that is happening so then you’d end up with tax deferrals sitting against the property for decades unpaid waiting for the person to pass away which poses other cashflow problems.

fliball123

https://www.boards.ie/discussion/comment/120607847#Comment_120607847

Hows about no more taxes until our spend side is sorted I find it funny people think there is only one way to go in this country the powers that in control are wasting billion after billion and our solution is tax more or differently?