Ideas for the next-generation Property Market

I agree 100%

At the very least, protected structures should be protected. I bid on a place last year which was covered on the Pin in the price drops section, Ballyroan Lodge. It’s a protected structure which has planning permission for a complete renovation and a modern extension to be built on to it. It’s got a hole in the roof, the boards have been pulled off the windows and it has been vandalised. Meanwhile the vendor chose not to accept my quite reasonable offer for it, and the planning is going to expire in a couple of months. So this supposedly protected structure is really going to fall apart completely

The council has the power to enforce protection of protected structures - if the owner does not comply, they can go in, do the work then bill the owner. It’s more a question of whether they use that provision or not.

Mortgage lenders must be allowed to foreclose at some point even where a family home is involved. Banks can’t be expected to lend on the basis of meaningless collateral. Also, repossession sales are one of the mechanisms that help an overpriced market to correct. Lower prices, whether sale or rental, help everybody on low incomes, not just those in possession of a house. Reduced prices also make it cheaper for the state to provide housing for those with no income.

That the “market” can be tamed. :open_mouth: Obviously a valuable lesson has not been learned.


May I suggest the corollary:
For thinking that government actions have no impact on the size of bubbles and busts, after all we’ve been through…


More generally, people respond to some extent to incentives, which policy can change. Hence…
That is why I include a site/land value tax. You are penalised every year you sit on something and do nothing with it. It’s not perfect but it does at least impose a cost on those who waste a scarce resource.

My view has been clear from day one. You are only designing a system to fail a bit less than the one before. You’re not joking when you say “its not perfect”, if that yours target, please give up its doomed to failure.

I only came her to point of the self inflicted non thinking doom ahead. I never bought what was being sold. I never aspired to the delusion. The market is not a perquisite to living. There is nothing you can do to change this. Nothing.

To quote Mr G. Buffalo “But the world they live in is mean. And it’s built on sheer *denial.”

*If you want a solution there might be a clue in that there quote like.

Agreed mostly. The non-recourse bit is vital. You must assume mendacity in this world unfortunately.
Why stop at putting capital gains on non-ppr at 75%?
Why is there a cgt exemption on PPRs in the first place. It encourages over-investment in one asset class.

Lets start a protest march. End PPR exemption now!

Edit: why isn’t the interest deduction on borrowing on residential property ended. It is manifestly unfair.

Forget about people they trump assumptions, it is the “market” that gets gone mendacious each and every time. Oh but what is the market! People… yea and people follow incentives… :astonished: … but but is living not incentive enough? No its not the INCENTIVISORS are King in a world of the living dead.

Exactly. This is what policymakers and social scientists try to do! If people are looking for perfection, try a physical science maybe…

The variable rate mortgage will be a permanent feature of the mortgage market in Ireland as long as we remain so reliant on the ECB and the inter-bank market for funding, which are short term loans in nature

The reason Fixed Rate 30 year deals work so well in the US is because the GSE’s (Fannie/Freedie) are effectively set up and implicitly guaranteed by the US government to provide 30 year funding at a subsidised competitive rate. The US Govt keeps a steep yield curve to avoid them going bust in an environment like this

There is no mechanism for Ireland to provide 30 year funding at a “competitive rate”, because the only competitive funding we have access to is short term in nature and will be for a very long time.
If we went to borrow for 30 years outside of the ECB/IMF/EMSF, I think its obvious that the rate would be 10% area, which is obviously not practical.

Even when things stabilise and the banks/govt. are in good shape in markets eyes,the rate to borrow for such a period will always be materially higher, assuming the yield curve reflects the fact that interest rates mean-revert from low levels

Look at it this way, the Variable rate offered at most Irish banks is still lower than the rate the US Govt can borrow at for 30 years!
ie there is no free lunch by borrowing for longer term…you pay a price for locking in the rate today in “the midst of an expectaion of rising rates”

I’ll wade in by starting with:
a. This is largely irrelevant because it will be at least 20-30 years before there’s a whisper of another boom in Ireland, by which time your prognosis/diagnosis will be long gone stale!
b. I’m concerned by your promotion of more government interference in our lives - more tax, rules, bans etc.

  1. A public real-time national house price register: to give households the information they need, preventing panic buys/sells
    **useful, needed; **
  2. An annual land/site value tax: to give local government the revenues to fund local services, and to prevent land hoarding
    You mean like more tax; property tax? No thank you. More government interference…
  3. A set-in-stone maximum LTV: to prevent one of the major causes of bubbles, credit standards responding pro-cyclically and creating or fuelling a property bubble (I’ve even worked out a stylised example with numbers… that’s the graph below!)
    Set in stone, but to be overrode by insiders ? I think its better to make the lenders responsible and to fully carry the can for reckless lending.
  4. A ban on variable rate mortgages, meaning banks only offer fixed-for-the-term rate mortgages: to give households and banks certainty, and to insulate Ireland from one aspect of ECB-driven recession syndrome, but eliminating the cash-flow constraint on consumption of rising interest rates.
    Give people a choice yes, or even force the banks to give choices including 20 & 30 year long term morgages; but do not force or ban people to do anything!

I don’t see why it must be so.

Perhaps our problem is that there has been too much innovation in finance. As Winston Churchill once said, “we must beware of needless innovation…”

Imagine we rolled back financial innovation to the very early building societies - where members of ‘societies’ paid a monthly subscription to a central pool of funds which was used to finance the building of houses for its members.

The administrators of these funds would also have the responsibility to lobby and ensure that members got most value for money, and that building funds did not get frittered away in profiteering, speculation, too many middlemen, etc.

It would be a blow to the ‘industry’ for sure. But there is no doubt we need to get back to basics on this question.

I think OW may be getting at a point that was made right from the beginning of modern economics. Here is Ruskin back in the nineteenth century on this point:

Personally I’d never consider a tax an incentive, rather a disincentive… but I get your point.

Somebody who’s sitting on a undeveloped piece of land or a derelict house could probably well afford the tax, so why bother do anything with it? I know all too well of a housing development where there’s been a gaping big hole in the middle of it left by the developer where a business complex was to be built (see rant above about idiots in planning departments).

This developer could well be bust, who knows, but nothing will happen with this goddamn hole. Planning will lapse on it and then what? If such a scenario existed where residents had the power to set up a company, throw a few non-existent quid in a pot, buy back this hole in the ground, fill the thing in and put some swings on it for their kids, wouldn’t everybody be a little better off? Developer (huck, spit) gets money for the hole and residents get to add a little value to their immediate area and have amenities for their families. To me it seems like common sense… a commodity thats quite rare in this feckin country.

In other words…“Pay Me I’m a FAILURE! and I’m really good at failing, I’m worth every penny!”

I rest my case.

Good start Ronan.

The first thing to realise is that you cannot eliminate the risk of a future housing bubble, just manage that risk. The suggestions that you make will go someway towards managing that risk.

There are two areas which I think could be modified, firstly any property tax should be hypothecated of ring fenced for local use. For this to be successful, there should be more power devolved to and more accountability in local government with the ability to impeach public representatives and civil servants if necessary.

Secondly, and this is the elephent in the room, are the planning laws. It is a great motivator to corruption when an acre of agricultural land valued at 8000 euro, is rezoned for development and is then valued at 500,000 euro. There will never be any stability in the housing market until this farcical situation is resolved. We are now in a position that so much land has been zoned for building in certain areas that it is now being considered for re-zoning as agricultural land. In twenty years time this will be re-rezoned as building land with a massive increase in value.

Completely. What I’d say to those above, like OpenWindow, who argue that you can’t meddle with markets or that more government intervention couldn’t possibly be the solution is that this is a case of risk management in a system where, with adaptive expectations, there is extreme endogenous instability.

On planning laws and local government, again, I agree completely. My only further refinement would be to vastly consolidate county councils so that local government occurs in economically viable regions, of which there are probably about 5-6 on the island.

Lastly, on the de-zoning re-zoning thing, a land value tax properly implemented can do away with a lot of the wild swings and private profits from pen-strokes.

Forgive me if this point has already been made (long day at work - no complaints) …

One of the most over-riding imbalances in the market has been the difference in the tax-treatment between owner-occupiers and investors.
Investors get to write-off 75% of their interest payment against their income.
Whereas the owner-occupier is subject to a much more misery form of mortgage interest relief.

Ultimately, this advantage allows investors to fund a larger mortgage, thus driving prices higher (at the very direct expense of owner-occupiers).

Mr A is getting closer to the bone here of any of yis and yis don’t totally get it. The mendaciously illicit way in which people have been lured into believing that the current model of shelter provision is optimum is well, mendacious! (thank you to blame game for introducing this wonderful word to the lexicon again)

There are some good points I don’t mean to be a party poop however I’ll sum up my feelings and get to the point by saying you’re all nearly mad what with your trying to re-inflate the bubble in this here thread!

It could be worse!!
… like the UK where they abolished MIR in 2000 for owner occupiers (G Brown had the cheek to call it a Middle Class Perk!!)
Yet the ability to write off interest is still there if you run a buy2let empire
I think they even discussed gradually abolishing it for buy2let at one point, but realised quite quickly that every bank in Britain would be bankrupt very quickly as very few Landlords would remain solvent for long.
The US apparantely once even considered limiting the ability for a company to write off interest payments against other income…naturally the private equity lobby in Washington saw a trainwreck ahead and made sure it was quickly brushed aside