6.5m is a big chunk of change considering the house below that sold for a million on Palmerstown Road. I know it was a fixer upper but if you put 1m into that one surely Temple Gardens can’t be worth 3x plus the price?
This is not a a “real” transaction.
It is a tax (most likely inheritance tax management) transaction (see below).
They could buy almost same house + plot just two doors down for almost 50% of this price (7 Temple Gardens)
(and been stuck on market for a long time now).
Didn’t realise until i checked, that for long-term holds, the tax advisor of beneficial transfers - of a certain kind - will strongly advise to transfer the asset at the highest possible price justifiable (you can convert this transfer price as the new “base cost”).
This explains why we have also seen a few other “inflated” transfer prices of houses on Ailesbury Road (i.e. 73 Ailesbury Road) and of course, the most (in)famous transfer of them all, Walford on Shrewsbury Road for 14m (at the height of Ireland’s property collapse, when it would have struggled to break even 10m).
The fact that stamp duty is still so low, and that property taxes are frozen (and the EA can re-value down later for property tax purposes), means the the benefits of “inflating” the transfer price for the Irish Revenue, far outweigh the costs.
However, 5 it will look a bit more reasonable vs. 1 Temple Gardens that will print for a higher figure than 7 Temple Gardens, but was in incredible condition internally (1.5m re-fit). However, it will still look mad to anybody who understands pricing in this area.
The trick is that when the asset has been “washed” (i.e. taken into an offshore trust for ideally +5 years to clear the initial transfer of any tax liability to the beneficiaries), then it can be brought back into Ireland by the beneficiaries at a new “base cost” (i.e. this would be done where the beneficiaries are Irish resident, and will want to liquidate the asset while still Irish resident, but not for many years yet). The Irish beneficiaries effectively buy it off themselves (i.e. no “real cash” changes hands) from their offshore (i.e. non-Irish registered) trust.
While the “payment” for this new “base cost” by the Irish resident beneficiaries is not actual cash, the stamp duty cost is real cash. However the new “base cost” that they pay, sets the base level for any future CGT gains owed to the Irish Revenue, and inflating it far outweighs any stamp duty costs incurred. Again, this only makes sense if the asset will be held for many more years (i.e. if you are going to sell it as soon as you bring it back home, you want to be closer to current market value).
Hence the need to get the highest “base cost” possible when bringing the asset back to Ireland.
I think a couple of high-end houses have added 25% over market in doing these transactions (i.e. Ailesbury Road).
However, I think 5 Temple Gardens is the biggest inflation of “base cost” we have yet seen (far more than Walford).
What is the benefit/goal of the transaction? There are multiple costs involved, such as the maintenance of the offshore investment vehicle and the payment of stamp duty multiple times. The owner here is an individual occupying a PPR. There are no tax benefits of an alternative structure as the owner is not liable to any tax on the sale due to PPR relief?
The vast majority of restructuring transactions in the high end have been taken by people who are heavily involved in property (and therefore heavily indebted / subject to onerous personal gaurantees) so restructuring can mean separating an asset from themselves and protecting it. Also we have seen restructurings as part of NAMA deals.
It makes sense that this would be a restructure given the insane price, but I’m not seeing the potential benefits of it given the profile of the owner unless it is related to estate planning and passing of the house to their children and even then, there would be easier ways to do it (i.e. moving out and letting child occupy to meet dwelling house relief conditions).
The goal is to pass on a major house to beneficiaries free of tax. It is usually children, and the goal is to avoid inheritance / transfer taxes. However, where the original owner also had money offshore, it can also be used, via the asset, bring some of the money back onshore. This can also be done for the benefit of the children (or others).
5 Temple Gardens was probably in a structure offshore already (and had been for over 5 years, if not longer), during which it was passed to the beneficiaries tax free. This is now the beneficiaries (children or others) bringing the asset back onshore but not for sale for a good few years yet (otherwise such a high inflation of base cost above market value is not needed).
“Legal Eagles” feature A LOT in these kind of structures. They do the legal work themselves and the operation of the trust costs almost nothing (as it produces no accounts etc.). The only thing they need is tax advice (usually KPMG / PWC), but it is worth it.
There is a more “advanced structure” where the house gets sold to an offshore trust (using the owners offshore “hot money”) and thus the owner of the house gets a cheque (from his offshore trust / “hot money”) which is tax free in Ireland (i.e. a normal house sale). The “conditions of the sale” allow the owner to stay in the house until death. At death, another offshore trust (for his kids), becomes the beneficial owner of this trust (i.e. no inheritance tax). In a very “grey” transaction that would need high lawyer + accounting type skills, the Irish beneficiaries, eventually buy back the asset into Ireland with cash lent from a private bank, but secured on the funds in their offshore trust (i.e. back-to-back structure), for which the private bank charges a “fee” but not interest. This is a loan that never gets repaid, but from the Irish Revenue point of view, looks like a normal leveraged transaction (Ansbacker was a very very crude version of this). Of course, it is very unlikely that 5 Temple Gardens is of this level of sophistication.
So, not only do you avoid Inheritance Tax (not small for big Dublin houses), but you can also transfer money that you should not have (i.e. Frank Flannery type money) via the house.
Is it sold as a PPR or is it an inherited property. If the latter then wouldn’t there be onerous tax (33%) to pay once you’ve exhausted your (paltry at this level) allowances? Even at current market rates.
In that instance, paying stamp duty appears trifling.
By overpricing now you hedge against future market price rises in the time it takes you to “wash it”. Those increases would attract CGT on values over and above probate valuation, if valuing at actual market value now).
It is usually dumb to hold your PPR outside of your own name EXCEPT for high-end Dublin houses, where the inheritance tax alone, makes transferring it into the ownership of an offshore structure a no brainer (if you have money you should not have, all the better).
There are many many high-end Dublin houses held this way (with the owners still inside, and in good health).
Many Noel Smyth properties that came to market had such structures around them
There was a time in the 1990’s when the Irish Revenue were all over these types of these set-ups (probably post Ansbacker), but in the naughties, they seemed to stop perusing such cases / odd transactions (maybe the overall tax take was so big, they didn’t care).
"A house on exclusive Temple Gardens in Rathmines has sold in an off-market deal for €6.5 million – the highest price achieved for a residential property in Dublin in 2016 so far. St Dominic’s, 5 Temple Gardens, is a large detached redbrick house on about a third of an acre with an expansive north-facing rear garden. The property is the family home of the late barrister and former attorney general, Rory Brady, who died in 2010.
In spite of its many wonderful features, the house features an unsympathetic flat roofed two-storey rear extension and a large conservatory, both of which will likely be removed by the new owner as part of the practically inevitable refurbishment programme that buyers at this end tend to undertake.
Across the street, 23 Temple Gardens, the former home of ex-politician Liz O’Donnell, has been the subject of similar treatment after the house was purchased for €4.5 million in 2014. The house has undergone a lengthy refurbishment and a 1,000sq ft rear extension added.
The outcome is also pending on another recent sale on the road, that of Subiaco, 1 Temple Gardens. It came on the market asking €4.75 million, and sold so promptly it would indicate it sold for at or above the asking, though precise details have yet to emerge.
Meanwhile, Sunningwell, 7 Temple Gardens, a similar detached house to number 5, has failed to sell since coming on the market in 2014, even after a price drop last year to €3.95 million. While it is marginally narrower than 5 Temple Gardens, its reduced price now looks like a relative bargain compared to the recently achieved €6.5 million.
Temple Gardens has long been one of Dublin’s best addresses, attracting a who’s who of the professional classes, but the recent sale positions it well ahead of roads traditionally considered more desirable, such as nearby Temple Road and Dublin 4’s Ailesbury Road.
Despite its northerly orientation and the likely prospect of a full renovation, the sale of number 5 outprices even comparable properties on Shrewsbury Road, which less than a decade ago ranked as the sixth most expensive road in the world."
FROM: Editor of Irish Times
TO: No-name Irish Times Property Dept.
Dear No-name Irish Times Property Dept(*).
We all understand that without Property advertising (commercial and residential), the Irish Times would be insolvent.
However, we must also understand we dodged a huge bullet in not being held culpable for colluding in ramping property prices during the naughties, and almost bankrupting the Irish nation (the state in which our readers reside). Remember our constant “plant” articles about “supply shortages”, “loads of cash in the system”, “canny buyers ‘snapping up’ 7m houses”, sale prices of “about 3m” when it sold for 2.35m, why Ireland’s real estate fundamentals are “solid / sound / firm / robust etc.” based on “affordability” (whatever that meant). It is ironic - and a complete accident - that we published an article by Dr. Morgan Kelly (which we worked night and day to discredit afterwards), that probably saved our bacon here. We may not be so lucky again.
In this regard, I have read the attached piece which I know was ghost written by a lady in Sherry Fitzgerald. While we are still held over a barrel by Irish property agents, we cannot allow such s*e to be printed again in our paper. If you use an online tool called “myhome.ie”, you will see that around the corner from 5 Temple Gardens, is High Cross Temple Road. High Cross a better road, better + bigger house (1.5x size), better internal condition, much bigger site site (4x), and much better site aspect (fully south vs. fully north facing) and almost asking the same as 5 Temple Gardens (and has been for a while now). And if that is too much analysis for you, we have the next door 7 Temple Gardens, with an almost identical site size, identical house size, identical house condition, and identical aspect, rotting on myhome.ie for years now at UNDER 4m. In addition, every fking ejiit in Dublin property knows that 1 Temple Gardens had a superb +1.25m re-fit vs 5 or 7 Temple Gardens and got the “walk-in” price (which this lady also knows precisely, but reporting the price does not suit her spin, so she leaves it hanging).
It is not that I am looking for Woodward & Bernstein, or even god forbid, Cagney & Lacy, in terms of investigation (in fairness, the buttons that we pay you would not merit it), however I do expect you to do some f*****g work.
You might actually protect this lady in Sherry Fitzgerald from her own stupidity in trying to spin potential tax planning (c. +2m worth), now that we are 5 full calendar years past the deceased of the original owner (as KPMG / PWC will advise you).
In the 0.001% chance that this “transaction” was not tax / estate planning driven, then we need, as journalists, proof from her as to the provenance of the buyer, and why they paid such an incredible premium for a fully, and very modest, north facing garden (i.e. there is nothing “must have” about 5 Temple Gardens, in the way that there was about say Milverton in Herbert Park.)
I know that she was rattled, having sold 45 Sandford Terrace quickly for only a tiny margin over 47 Standford Terrace (despite 45 being worth more than 47), and I know that she got another spin article beside 5 Temple Gardens, to defend this price and spin it as a “strengthening” of pricing (even though it was a weaker price).
But for f**ks sake, we are only a Fintan O’Toole away from ending up as the Irish Independent. Do you want to spend the rest of your journalistic career writing attack articles on non-FF/FG politicians, re-interpreting Bertie (not Brian yet) as a mis-understood / unlucky visionary, or developing total journalistic amnesia over any outcome of a tribunal and the actions of parties disclosed within. Say good-bye to any involvement in the ICIJ and any future “Panama Papers” gigs. We may never have a Government who will prosecute the likes of Flannery or Lowry for tax or vat evasion (yes Frank, we saw that trick with Rehab on vat), but that does not mean we cannot at least give our readers the small victory of reporting it.
Next time that lady from Sherry Fitzgerald wants to use our paper for her spin, tell her the fax machine was broken.
And then go an smash it against the floor.
(*) Because nobody in the Dept had the guts to put their name to the piece in question.
Hard to believe that c. 1m of inheritance tax and another 1m of future CGT has been so easily managed.
(and by the family of the ex-AG).
I think they will be very annoyed at [snippedy snip snip] highlighting the “transaction” even more.
(she was probably annoyed that they did not involve her in the “valuation” used for stamp duty etc. and got a bit desperate given how poorly the sale of 45 Sandford Road went vs. 47 Sandford Road, and anyway, going for such a mad figure like 6.5m in the era of the PPR is really asking for trouble).
Have checked with all main agents and nobody knows anything about this (and are equally shocked at the price).
They all know who are in the market for this kind of house (a tiny handful) and none have bought this.
There is also another - and better - house on Temple Gardens being discretely offered, but a lot lower than 6.5m
As I said above, there was a time post Ansbacher when the Irish Revenue were very alert to these type of inheritance tax planning schemes (they even started going along major roads to check the ownership structures one-by-one), but for some reason, they are not that interested any more (hence the structures that Noel Smyth had around his Ailesbury Road house.). Perhaps the reduction in CGT to 20% made the costs of investigation less worthwhile?
I think there will be more press on this to imply a real bidder had come forth (i.e. “senior sources within the industry confirmed that …”) and make sure that it does not accelerate any further media attention (the Irish Times have compromised themselves and need to shore this up), however it will just lie dormant until the beneficiaries are ready to sell in the years to come (i.e. “same sources implied that the new owner is abroad, and will not use the house immediately”).