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

Curious, can you link that part ? Can't seems to find it myself

This kind of carry on is disgraceful, bordering on the sociopathic:

i personally saw one recently where the gaff was bought for 380k early this year and relisted at 480k less than 3 months later, and subsequently sold. It was around the height if the bidding war madness so presume it went for over that even. It's not up on the PPR yet so looks not to have closed so far.

When I lived in Germany, if you sold a property at a profit before 5 years of ownership, there was crippling CGT and other taxes that would not only eat up all the "profit" but also, I believe, eat into your equity. This massively disinsentivised such types of speculation. I considered buying but hadn't decided to stay long term and was advised against it for those reasons.

The current system massively encourages this crazy carry on. How else can you make a cool 120k entirely tax free in a year on top of your other income. I mean besides winning the lotto.

There are a few models for valuations one of which is rent but the driver of the main model they normally quote is not rent but more supply, demand, disposable income etc.

personally I would question the results but it really shows the risk across the rest of Europe and how the the CBI measures have kept somewhat of a lid on house prices.

Germany Netherlands wouldn’t be the first countries you would think of when it comes to housing risk…yet they have been advised of risk in their housing markets by the ESRB. Ireland on the other hand gets praise for CBI policies at reducing risk.

Whilst looking for that report I came across a paper on the impact of institutional investors on housing just published…I only read the conclusion but interesting that they talk about CBI proposing putting limits on how much investors can borrow etc.

https://www.esrb.europa.eu/pub/pdf/wp/esrb.wp~6a9f153304.137.pdf?39c93cb4c88c5a51846c25305f129b60

If you buy an affordable new build home and 12 months later sell it for 120k over what you paid, and pay no tax on that capital gain, there's something wrong with the system and its no wonder there are affordability issues.

I saw someone buy a secondhand home early this year and within 3 months of buying it had it up for sale 100k over what they paid.

There is a big difference between buying a home, growing as a family and trading up to a bigger house, and flipping houses and exploiting the system to avoid paying tax. I don't believe you can't see the issue with the latter.

Sorry, but if you're flipping a "family home" within 3 months at 100k+ profit, you're exploiting a technicality to avoid CGT. Fair dues and all, but let's call a spade a spade.

In Germany if you sell before 5 years you're only penalised if you sell at a profit adjusted for expenses/inflation etc. Seems like a fairer system and ensures a "family home" is treated like a family home and not an investment opportunity.

But I guess we are where we are. No problems here, nothing sinister coming down the pipeline for future generations. It's all grand, keep doing what we're doing.

German system as described sounds logical, ensures buyers put some thought into a purchase and would help prevent a situation in the celtic tiger where young couples became trapped in tiny 1/2 bed apartments not fit for families

Of course our systems don't do learning from past mistakes, we specialise in new ways to make the same mistakes

Ps families don't arrive in 3 month intervals

Nice one, the figures are from Q4 of 2020. I am sure prices have come up a good bit since then.

My dad got cancer so we moved back during the pandemic to be close to him. But yes you're right, I should have stayed in Germany because I find merit in a sensible tax law targeted at aiding in the prevention of spiralling home price inflation in an environment of high demand and low supply, and see the potential of a similar application in combatting the same in Ireland. Such are truly the important things in life.

You know, avoiding things like this:

Akin to kicking those behind you on the ladder in the head and pulling up said ladder.

The problem is the current system encourages such sociopathic behaviour. It is possible to have more sophisticated tax laws beyond "Is PPR, no tax".

To be clear, in the follow scenario:

I am a single man. I buy a house. Within 3 months I decide to exploit desperate people in a distressing housing situation and list the house 25% over what I paid 3 months previously. I make no changes to the house and use the same images from the previous listing in my new listing. I sell the house for over asking. I pocket 100k+ tax free.

In your view there is a) nothing ethically questionable about this, b) this practice should be protected by law and c) see no way that this kind of behaviour could be detrimental to our society.

In my view there should be a mechanism whereby revenue could come knocking on the door asking questions in such a scenario.

If you 'flip' your PPP, where are you going to live then? You either use the equity to buy a new place, which will hammer you in transaction costs and commissions and cost similar to what you sold for, or you 'pocket' the profit and join the rental market. The 100k might get you a similar rental house for 3 years or so, but what do you do then? I can't see this process driving up house prices, it doesn't make any sense.

Look, I know that the Irish ideology on housing is bound up in the idea that one's PPR should be this magical untaxable asset that will always appreciate. We don't invest, but rather see our house as our long term investment by and large.

The problem is, the whole concept of the properly ladder is predicated on, and encourages screwing those that come after. There is very little benefit to anyone in a property bubble, besides to those who get warm and fuzzy thinking about a completely illiquid and unproductive asset appreciating in value. If you realise those gains you still need somewhere to live so are still victim to the bubble. Those at the bottom coming in, however, are severely disadvantaged to the point of being disenfranchised.

Basic human needs should be protected against runaway market forces, especially when the lack of those needs threatens to destabilise society. And that truly is what we are facing into if the current crisis is not dealt with. It needs a radical rethink.

Any measures targeted at mitigating that risk should be considered.

The fact that a PPR is not subject to CGT is testament to the fact that the property "market" is no standard market. Any other commodity that is traded at a profit is liable to be taxed, so there is clearly a special status afforded to a house.

The more concerning factor is how the price and rent increases have spread across the country. There now is no escape and for those that have, commuting costs will be a big issue

Ah the classic retort. Anyone that looks at the status quo and sees it isn't working for increasing numbers of people is a "begrudger".

Here's the thing. I'm actually in an incredibly privileged position and can afford to wait and save a considerable amount of money before I buy. I go viewing houses every weekend with no pressure. I'm not going to be evicted and I'm not paying crippling rents. But I see people at the viewings and I can see how much this whole thing is taking its toll. The couples with new borns desperate to get somewhere. The foreign folk with no support structures in the country working out how they'll make an overpriced run down kip with original 50s wiring livable. Negotiating with each other how they'll make it work at the absolute edge of their affordability.

It's bleak out there, but I'm alright, Jack.

I dont think you read my post, the whole point is that everyone needs a place to live. If you have that and sell another investment property, then sure it's 100k profit. If it's your PPR and you sell it you make 100k but you then need to secure a new house which will eat up all that profit plus additional transaction costs, this is precisely why there is no cgt on your PPR