Playing devils advocate - what if...

…property prices do not fall?

What if the government and VIs succeed in propping up prices - what happens next.

Is it sustainable?

If not then how long?

Prices are set by what the market can bear. Right now the market cannot bear the asking prices of most properties on the market.

So if prices don’t fall, it will be as a result of the government/banks doing something which puts more money in buyers pockets to offset against the current level the market is ‘asking’.

Do you think it is government/bank priority to give more money to people right now, or take even more money off them over the next while? :wink:

The money doesn’t exist to sustain prices are their current level so one of two things has to happen:

  1. Ireland becomes incredibly wealthy through the discovery of some natural resource or through some amazing entrepreneurial activity. The average wage doubles or triples with current prices remaining static.

  2. The ECB creates enormous sums of money on our behalf.

Otherwise the only possible outcome of government policy is the property market remains as it is now, with a negligible number of transactions.

All that oil will be off the wesht and the big benefits will be to place like Castletownbere and Killybegs , not Clonsilla and Killiney :slight_smile:

We lack transmission mechanisms as our banks are fecked .

I sense your commitment wavering grasshopper. Use the force.

Here’s the thing…

During the boom rational objective people were at odds with buyers who were willing to pay anything
for a house, hence prices kept climbing.

Now the same rational people are at odds with sellers who won’t accept that the house isn’t worth
what they think it is.

The crazy buyers eventually came around to the rational point of view. But boy did it take longer than we
thought it would. It happened though, and the longer they held out, the greater the swing when it happened.

The irrational sellers will hold out too, and for longer than we expect, but they’ll come around too.
They have to. That’s just how it works.

Remember also, you can prop up “asking prices” or you can prop up “sale prices”
There’s a big difference.

To prop up sale prices you need to convince buyers to pay more.

To prop up asking prices you only need to convince sellers to refuse to sell.

Convincing the Sellers to hold out for higher prices is a waste of time.
It leads to very few houses selling. At some point the VI’s realise that really their
vested interest isn’t in high prices, it’s in volume, transactions, actual buying and
selling happening.

Look at the claims made by the VI’s to justify higher prices. One by one they fall away.
The most recent one was developers will never sell for below cost. Now there are any
number of Ads on Daft advertised as below cost.

We’re still moving in the right direction. Don’t worry.

-Rd

Not true. Their dealers are merely holding out on them. They’re still begging for just one more fix and they promise they’re good for it.

I’d have to agree.

:smiley: Oh, don’t worry, no waivering here :laughing:

I totally agree with the basic reason outlined why prices cannot remain high (i.e. the money simply isn’t there). Playing devils advocate though and I was more curious what might happen if prices don’t drop (for whatever reasons).

Me personally, I plan on purchasing but only if I can find the right house at the right price (which incidentally would be a 30% - 40% haircut on most asking prices today).

And another question I thought off - what if stamp duty is abolished and a property tax is brought in… what happens to all those who have already paid stamp duty? Will they (should they) have to pay the property tax as well? Wonder have the government thought of this one!!

I much prefer transaction taxes to asset taxes so I’d rather they stick with stamp duty. I don’t see how they could exempt people from paying a property tax - it would also represent a severe disincentive for people to sell up.

So potentially thousands of people who have purchased and paid stamp duty will be hit again with a property tax while those who wait will only have to cough up the property tax. (devils advocate again :wink:)

So for me personally I would be very reluctant to purchase now, even at the right price, given that there is a chance stamp might be reformed and we will be hit with a property tax. I would rather wait to see some stability around the market and it’s associated costs before committing myself. Wonder how many other potential purchasers would be in the same position…

Yeah, and the whole stamp duty thing is going to hang over the housing market (and probably commercial property aswell?) until a change of government. In fact, if I was an opposition party and wanted to head off any chance of even a mini boom, I’d be making noises about stamp duty reform too…

Like in making loans available to them and putting a spin in the media that this is their last chance before they miss the boat? And that they’re getting a bargain… I wouldn’t under-estimate peoples’ gullibility. Or, the political will to make this happen.

Again, by reducing interest payments, giving ‘holidays’ on outstanding loans, and keeping alive in the ‘in circles’ the message that everything’s going to be alright - just give it time…

… All I’m saying is that at this point, I wouldn’t discount anything. And I wouldn’t under-estimate what these animals will do - especially now that they’re backed into a corner… We’ve seen before how in their culture they will try any desperate gamble, right up to the very end. Witness Bertie in court or any number of other examples. They will keep on rolling the dice until the bitter end.

Like most other people here I want to see an end to the criminal profiteering and speculation on land and building. Now is not the time for complacency imo.

This is sort of what I was thinking when proposing the question only you have articulated some reasoning so much better :wink:

Yep. Conversely a switch from property tax to stamp duty wouldn’t exempt people who’d paid the property tax.

Would FTB’s pay the property tax? They didn’t actually pay the stamp duty but they were exempt from it. Do you pay property tax on a property you inherited if stamp duty was paid while purchasing it?

Once you try to exempt people from it then it becomes horrendously complex (and expensive to administer).

Then again I don’t see why FTBs should be exempt from stamp duty anyway or why new houses should be exempt. If anything you want to tax the first transaction, not subsequent ones!

+1. Roc… sure wasn’t that what the Clowen was doing yesterday telling the faithful that “just another few months lads and the economy will take off again…” :unamused: