implications of budget 2012 for potential buyers

It seems that the government has gone to the mat this year to keep property prices up and “encourage” people to buy in 2012.

  1. NAMA–no firesales and indeed it seems to be keeping rents inflated
  2. Mortgage tax relief: buy in 2012 or else…
  3. rental subsidy: landlord welfare untouched; will keep rents static
  4. Very few foreclosures (basically requires years of non-payment or flight from the country)

CGT relief if you buy now and sell for a profit in 7 years

My own opinion is that the 0% CGT ‘incentive’ is to facilitate NAMA as it begins to offload property in 2012.

That and the ‘clarity’ on UORR should help NAMA find some suckers to buy commercial property.

Budget '12 designed to keep NAMA & IMF/etc on side for another few years at least. Everyone else a side show.

As a potential buyer I find the whole thing rather depressing.

Then again I could buy next year pay the mortgage off for a few months and then stop paying it, safe in the knowledge that I won’t be chucked out on the street in a hurry. I’ll save quite a bit living rent free I’d say. Then I’ll sell for a profit in 7 years time and pay no tax. Perfect. Might even rent out a room or two while I’m at it.

I wouldn’t be surprised if there were people seriously considering doing this kind of thing without any cop-on about the potential consequences for their future creditworthiness. When it comes to property, I think Irish people today are just as blinkered as they were during the boom years.

Last week I spoke to a guy who missed one mortgage payment three years ago when he was made redundant. He now earns a six-figure sum, more than he ever made before, but told me that single slip has had catastrophic consequences for his future financial affairs.

True, but I think it could work out in some cases. The Allsop auctions have shown us that the market is between 65%-70% down from the peak. This time next year, the market will probably be another 10% down on that again. Are peak bubble prices relevant, no, not really. However, the fact remains that certain investment properties are now easily yielding 10% and in some cases, quite a bit more. If you ask me, I think it’s a mistake to allow investors to escape CGT when they’re already buying at such prices.

A mistake in what sense? That its ethically wrong? Or that it doesnt make ‘business sense’ from the govt’s point of view.

No matter what way you cut it; in a very depressed market, if you want to induce people to buy you need to offer some fairly major incentives. You mentioned 10% yields. Yes they are 10%. And guess what, thats not enough to get people to buy.

The Irish govt (ie the Irish tax payer) has a massive property exposure. The MoF is trying to manipulate the price of property here (upwards) by trying to bring the ‘investor’ back into the market place.