Talk of property tax - stamp duty confusion de ja vu?

Is it just me, but has FF not learnt its lesson from the confusion it created when it dilly dallied about stamp duty a few years ago and effectively stalled the property. Hear they go again talking about maybe introducing a propoerty tax and effectively stalling any purchaser from making a decision.
I have a 2 bed apartment in D.18 that i have no idea what the value was last week, and its now no value minus 10% !!

Stamp Duty uncertainty did not halt the property market.
Stamp Duty was blamed for the market stalling by idiots and charletans who needed to
perpetuate the myth that left to their own devices house prices can go up at double digit rates forever.

Property prices stopped going up because prices can’t go up forever. End of story.

It wasn’t the collapse of the sub prime industry in the US.
It wasn’t the global credit crunch.
It wasn’t a magic leprechaun spell wearing off.

Property in Ireland was/is too expensive, so prices stopped going up.
When the people realised that trees don’t grow to the sky they stopped paying “whatever it takes”
to “git on de ladder”

“Uncertainty” about a new property tax won’t make property any less attractive an investment than it
is already. Pouring another gallon of water into a swimming pool doesn’t make the people in the pool any wetter.

-Rd

Are you trying to sell the apartment or do you just like to get a warm fuzzy feeling knowing the value the apartment?

OP has a point though.
Talk of property tax replacing or reducing stamp duty is going to put potential buyers off. Personally, am considering trading up (minor issue of shifting own house first), but would be obviously loathe to pay 50K+ in stamp now only to potentially have the system changed in the near future to one that abolishes or reduces rates (have seen 2% mentioned in the papers) and introduces an annual charge.

Right, the thought of how this tax is going to operate will have an adverse effect on the market. There was me thinking that the housing market had completely stalled already, what with crazy prices and the threat of the biggest recession Ireland has ever seen. Sort out this tax issue and it is full steam ahead so.

Ho ho. Disregarding your sarcastic retort, it is nonetheless a valid concern for anyone considering purchasing.

Any mention I’ve heard of the tax on second homes referred to it being a fixed amount per annum, regardless of the size of location of the house, only applying to second homes, and will probably be set between €200 and €600 per annum.

What’s the big confusion?

don’t have a link but there has been some mention in the media of the possibility of a property tax system replacing or reforming the current stamp duty system on PPRs.

Yeh but come on. That’s simply a preliminary to a user pays type tax, much like how bin charges were introduced. Fixed rate for everyone. Get systems in place to size and value individual residential properties then charge accordingly. It will be prob €2000 per year for a 3 bed in Dublin within 5 years.

why not have CGT on the sale of a PPR?
would mean that there wouldn’t be as much interest in selling it at a profit either

property tax will be introduced and will be gradually increased - the issue will be whether it is a flat tax or they seek to link it to value or location or give local authorities discretion to impose an additional local property tax

i would remove all interest relief for investors and occupiers on mortgages too as this contributes to house price inflation as people factor in the after tax credit cost

I don’t believe a potential tax is a significant issue for buyers.

Compared to how much you could lose just by owning a property in the current market, a tax is
small potatoes.

All talk of property tax relates to second houses (stop calling them second “homes”, they’re houses).
The potential tax is unlikely to be big enough to scare any “investors” that aren’t scared already.

It’s all a big non issue.

-Rd

depends obviously on where they set it but i expect they will look at average mortgage of 250/300k and savings interest cuts have brought and work from there

similar to what they did with petrol

I don’t think house price inflation is a big problem at the moment. :wink:

But this is certainly a possibility for a government looking to boost it’s income, but the owner occupier relief is politically dangerous, especially with the likelihood of rising defaults in any event.

What would CGT on PPR achieve in terms of the vendor? Reluctance to reduce price perhaps? Certainly they’d want a BIGGER profit.

As I recall the first big wobble was when McDowell said that PDs would push for a stamp duty change etc…?

Dont think he can be “blamed for wrecking the market”, but rather that that was the shake that caused the super-saturated solution to crystallise…if it wasnt that it would have been something else soon after…

Can’t agree. The psychological effect of proposed changes can often be enough to deter buyers - whether that’s rational or otherwise (and who said Irish buyers were rational? I’m not seeing much evidence myself). In this case though it is rational to be worried. For BTL specuvestors they’re being hit with a range of additional bills they probably didn’t initially factor in - PRTB, BER and now this. They’re quite right to start getting worried. As for private buyers? I’d say they’re also right to be worried. Once the camel has his nose under the tent we can expect the principle of property tax to be extended further. Will there be an annual tax on PPRs within 5 years? I’d be surprised if there isn’t TBH. This means a potential double whammy for many, with management fees and now tax as well.

With or without talk of tax NOBODY IS BUYING. Even when someone thinks maybe they might buy they often find they can’t borrow. This is happening regardless of any proposed tax changes.

There are two types of property investors. The ones that know what they are doing, and the amateurs taking a punt.
The ones who know what they are doing are not going to alter their behaviour significantly because of a new tax. And the amateurs were terrified to take a punt long before this latest talk of new taxes.

So what does this mean? People are going to stop buying PPR’s until the new tax regime is finalised? What nonsense.
If someone is in the market for a PPR, the fact that there might be a new tax within 5 years is irrelevant.
Either their will be a new tax on PPR’s or their won’t, there’s little if anything to be gained by waiting to find out.

Even if you hold off and the tax regime changes, and you then buy, how are you any more sure of your position?
When tax revenues falter again the year after you buy the government can change the tax regime again.

The irrational people will buy as soon as they can borrow enough to.
The rational people (if they exist) will buy based on some formula that they’ve worked out.

I don’t see uncertainty about a new property tax being a factor for the vast vast majority.

It is literally impossible to wait until the Tax regime stabilises before making a decision. The whole tax system is constantly in flux and that will get worse in the next few years.

If you don’t like that kind of uncertainty then just rent.

-Rd

Expected purchase price of a property varies according to the outgoings attached to it. That’s one reason why people will pay a premium for a house over an apartment - to avoid management fees. Or to put it another way, adding an annual fee to ownership of a property will depress the selling price of the property. Consequently if I’m thinking of purchasing, it’s rational to hold off to see if such a tax is introduced as the effect will be to depress prices if it is.

Incidentally, this is true albeit to a lesser extent whether or not the tax attaches to PPRs. At the margin at least some Cannies who are already struggling to supplement the mortgage on a BTL will be pushed over the edge by this additional tax. €600p.a. (the figure currently being bandied about) is a lot if you’re already struggling with voids, etc. Particularly so if it has to be paid in a lump sum as this will catch Cannies with multiple properties cashflow problems.

We might disagree as to the extent of the effect of this uncertainty. Obviously if I want a house now I’m not going to hold off indefinitely - and some people will simply factor these changes into their equation. But I think it’s slightly simplistic to say that these factors have no effect.

I think that this is revisionist to some degree. The market had begun to turn, the VIs brought up stamp duty as the reason for the market declining, despite the fact that it had no effect for the previous decade. McDowell, the fool, decided that stamp duty was a handy bandwagon to jump on to and he made some ill-advised comments. The VIs then said that it was McDowell’s comments that caused the markets to turn and was the reason that people were scared of buying.

In short, the market was declining before McDowell opened that big trap of his.

If people were rational they’d look at all outgoings associated with owning and base their purchase price/decision on that.

But let’s look at the facts.

  1. During the boom nobody gave a second thought to things like management company fees. It was buy at any cost.

  2. During the bust virtually nobody is buying at any price, and even those who’d like to are having trouble doing so.

There is NO SUGGESTION that a new tax will be introduced that will apply to PPR’s. FF haven’t said this, so this thread is talking about a hypethical response to a hypothetical tax that might never be introduced.

Management Fees actually Existed and it didn’t impact the buy decision, so how can a hypotethical non existant tax have an impact?

I think we’ll have to agree to disagree about whether it will be a factor.

From my own point of view, I’m watching prices with a view to perhaps buying when the time is right, and new Property Taxes are not a factor to ANY EXTENT.

-Rd