Housing Bubble Bursting

SimpleSam06

miju wrote:

jesus Gurgle the dogs on the street know whats happening at this stage with prices will you try and least acknowledge that and join us in the land of reality.

Year on years for 2007, what did I say. They won't accept it until the graphs are plastered across the front page of the Indo in January 2008. That's when the fireworks will really start.

Iristxo

What's wrong with "The property pin" website? Is it down?

miju

nope working fine for me

Iristxo

Thanks. Was typing "propertypin.com". Scatterbrain

miju

lollers

El Stuntman

miju wrote:

we're between a rock and a hard place and we're better off just taking the very painful quick medicine rather than trying to drag it out for some longer term suffering so we the economy can begin to return to proper fundamentals and be genuinely healthy instead of looking "bouyant" when in reality all it is , is a hyper inflated construction sector.

an excellent point this - hopefully Minister Cowen will take the same view in the Budget this year and not hand out subsidies (i.e. increased mortgage interest relief etc) in a vain attempt to prop up Fianna Fail's client base

Clause

El Stuntman wrote:

an excellent point this - hopefully Minister Cowen will take the same view in the Budget this year and not hand out subsidies (i.e. increased mortgage interest relief etc) in a vain attempt to prop up Fianna Fail's client base

Well......
From the Draft Programme for Government (its still in draft form, for some reason).......

"We will also implement major changes in mortgage interest relief for first-time buyers and those who bought a house in the past seven years. We will increase in Budget 2008 the ceiling on mortgage interest relief for first-time buyers and those who bought a house in the past seven years, from €8,000 to €10,000 for single people and from €16,000 to €20,000 for couples or widowed persons. As income tax rates are reduced, we will keep the rate of mortgage interest relief at 20% for all home owners."

conor_mc

Clause wrote:

Well......
From the Draft Programme for Government (its still in draft form, for some reason).......

"We will also implement major changes in mortgage interest relief for first-time buyers and those who bought a house in the past seven years. We will increase in Budget 2008 the ceiling on mortgage interest relief for first-time buyers and those who bought a house in the past seven years, from €8,000 to €10,000 for single people and from €16,000 to €20,000 for couples or widowed persons. As income tax rates are reduced, we will keep the rate of mortgage interest relief at 20% for all home owners."

Thanks for that Clause.

So at €20k interest, a couple would have to be paying €1,666 a month on interest alone to benefit to the fullest from this increase.

A 35-year mortgage at 5.25% of 385k would be needed to max out the relief. That's well above what your average FTB can afford anyway, otherwise we wouldn't be seeing a build-up of inventory in places like Lucan where you can get a 3-bed semi for around 350k.

Methinks this measure will only benefit the well-to-do who can afford large mortgages anyway, and the financially naive who are currently receiving an education in interest rates ....the hard way.

Colonel Sanders

same old stort re. FF and the property market, all spin with very little effect for the average joe on the street.

nsn

For those interested in drops in asking prices, the Gerrardstown House & Stud in Co. Meath as just dropped their asking price by a cool €2m, €15m to €13m, on myhome.ie. I've been tracking price changes here.

gurramok

€1.1m in duty...handy tax that

So a wealthy FTB pays nothing in tax, welcome to banana republic.

ixoy

It's interesting how the mortgage interest relief comes across - it would seem, initially, that if you're increasing the relief from 8k to 10k, then FTBs are all going to be saving 2k extra year. However, conor_mc's figures prove the reality of it and how ineffective it will actually be (especially with the amount for a mortgage being hampered by increases all the time).

So what would be a better solution? Would it work better, for example, to band relief up to a ceiling but against lump repayments (and not interest)? Is it better for the government to intervene and work on more social schemes? Is it better to let them seize all the vacant houses and redistribute them in a Robin Hood fashion ?

SkepticOne

ixoy wrote:

It's interesting how the mortgage interest relief comes across - it would seem, initially, that if you're increasing the relief from 8k to 10k, then FTBs are all going to be saving 2k extra year. However, conor_mc's figures prove the reality of it and how ineffective it will actually be (especially with the amount for a mortgage being hampered by increases all the time).

But increasing mortgage interest relief only pumps money into the overheated housing market causing prices to rise futher.

The slightly annoying thing is that one of the reasons we need greater mortgage relief in this country is because of the Euro interest rate rises. But if Ireland controlled its own interest rates they would be much higher than at present. We have artificially low interest rates because they are set to combat inflation at under 2% in the eurozone.

The correct thing to do (though politically unrealistic) would be to recognise there is an asset bubble in the the property market and take measures to hasten its deflation. This would involve simulating the effect of higher interest rates through fiscal means (i.e. reducing mortgage interest relief).

Cheaper house prices means less need for uneconomical subsidy of mortgage holders and less drain on the economy.

Needless to say this will not happen for obvious reasons.

conor_mc

ixoy wrote:

So what would be a better solution? Would it work better, for example, to band relief up to a ceiling but against lump repayments (and not interest)? Is it better for the government to intervene and work on more social schemes? Is it better to let them seize all the vacant houses and redistribute them in a Robin Hood fashion ?

Ironically, the best solution is cheaper housing, i.e. let the market run its course!

Victor

They should have reduced the mortgage interest relief credits years ago or introduced a property tax (with possible credits based on number of residents).

nesf

Victor wrote:

They should have ... or introduced a property tax (with possible credits based on number of residents).

Why? Property taxes just screw over people whose income is disproportionately lower than the value of their property regardless of when they bought their property etc.

Boggle

They should have ... or introduced a property tax (with possible credits based on number of residents).

HAving had first hand experience of living in England I can tell you that this is probably the worst idea of any I have come across in the thread. My aunt and Uncle are among the many (soon to be) elderly people in England who are going to be forced to move from the family home or possibly even emigrate due to property tax (and their not struggling either!). Its a serious hardship as its based solely on the size of your home and not on your financial situation.
How would you like to have spent your life working towards that home you always dreamed of and then face the prospect of not being able to retire in it???

....

Anyway, was talking to a wholesaler today who yold me that there have been up to 1000!! layoff's from construction in Wexford akone since last Friday!! Can't vouch for this but he keeps his eye on the ball so would be surprised if he's mistaken.

Anyone here have any firm confirmation of this??

Victor

nesf wrote:

Why? Property taxes just screw over people whose income is disproportionately lower than the value of their property regardless of when they bought their property etc.

Whereas the current system screws over people who need housing.

I'm not suggesting taxing families of 4 in a 3-bed house, but granny living alone in her corpo 3-bed would have to sell up.

I would also favour moving from a stamp duty to capital gains regime and granny being allowed avail of sheltered housing.

nesf

Victor wrote:

I'm not suggesting taxing families of 4 in a 3-bed house, but granny living alone in her corpo 3-bed would have to sell up.

That's a very regressive tax if you're targeting it against "little ol' grannies".

Do-more

Boggle wrote:

Anyway, was talking to a wholesaler today who yold me that there have been up to 1000!! layoff's from construction in Wexford akone since last Friday!! Can't vouch for this but he keeps his eye on the ball so would be surprised if he's mistaken.

Anyone here have any firm confirmation of this??

The Live Register figures are published by the CSO, on the first Friday of every month at 11am. So we can probably expect a sizeable jump in July's figures when they are published on the 3rd. August. Many newly unemployed who are on holiday pay may not get to sign on until early August so the full brunt of the figure will probably not be know until September.

mountainyman

Boggle wrote:

How would you like to have spent your life working towards that home you always dreamed of and then face the prospect of not being able to retire in it???

How would you like to spend all year working towards that dream holiday and then face the prospect of giving half your money to the state?
No one likes to pay tax, but forcing old people to downgrade seems like a good thing.

That said there is no tradition of property tax in Ireland but until recently houses were cheap as chips.

MM

D'Peoples Voice

conor_mc wrote:

Ironically, the best solution is cheaper housing, i.e. let the market run its course!

A possible solution would be to work from the top down. To explain, check out any house that is just above a stamp duty threshold, specifically the EUR 635,000 stamp duty threshold. I have found several instances of bids being submitted at EXACTLY EUR 635,000 for houses advertised at far higher than EUR 635,000.
Hence what would be the effect of INCREASING stamp duty FURTHER on houses above the EUR 635,000 threshold. This will make it more difficult to sell these houses, so their prices will drop accordingly. If the prices of these houses fall, then competitive pressures will push the prices of houses that were previously cheaper than them down also. This effect will filter downwards making it easier for people to trade up because while everyone's house is falling in value, the houses at the upper end suffer the greater fall so everyone becomes RELATIVELY better off except those at the top of the pyramid.
Now obviously there are serious flaws with this, but do the benefits outweight the costs?

mountainyman

mountainyman wrote:

No one likes to pay tax, but forcing old people to downgrade seems like a good thing.

Why the HELL would we want to FORCE OLD PEOPLE to downgrade?????

We have over 300,000 EMPTY houses!!!!! Force them onto the market instead of picking on old people

Victor

Deleted User wrote:

Why the HELL would we want to FORCE OLD PEOPLE to downgrade?????

We have over 300,000 EMPTY houses!!!!! Force them onto the market instead of picking on old people

I'm not picking on old people. I'm picking on people with excess property.

Sarsfield

Deleted User wrote:

Why the HELL would we want to FORCE OLD PEOPLE to downgrade?????

We have over 300,000 EMPTY houses!!!!! Force them onto the market instead of picking on old people

It's the problem of empty nests. Central suburbs in Dublin (and possibly other cities?) have extremely low density because the kids have grown up and been forced to move way out of town due to lack of availability of more central homes. These central homes are occupied by 1 or 2 elderly people. We end up with sprawl and nightmare commuting distances. We also end up with more family homes than we need because so many are under-occupied. This builds up an unnecessary and inappropriate housing stock. Which eventually leads to a crash.

Without expressing an opinion on "forcing" old people out, it would greatly increase the availability of housing in places where younger people with families need to be. This would reduce the need for sprawl, reduce the excess of larger homes, reduce commuting times & costs, and have positive economic and social benefits.

Maybe a way could be found to make it an attractive option for empty nesters to sell up an move to a smaller and more appropriate dwelling?

SimpleSam06

Victor wrote:

I'm not picking on old people. I'm picking on people with excess property.

So tax every house after the first, with an increasing annual tax. A person owning a home to live in would pay nothing, a landlord with one property would pay a small tax fee, a landlord with 5 properties would pay 5x or 10x that, and so on in a sliding (increasing) scale, so it literally becomes impossible / not feasable for one entity to own more than a dozen properties.

That becomes extremely tricky when you are looking at things like limited liability companies (one person could be director of ten companies, each owning 5 houses - they are seperate entities for tax purposes to the person themselves), shared ownership, questions of business partnerships and so on, but I feel it is a reasonable way to go. It would mean that you could make a living from letting properties, but not too many properties, and probably more than enough to make a person comfortably well off.

Its a bit extreme, but housing is far too important and basic a thing to allow monopolisation or large scale manipulation of the market, as we have been witnessing over the last five years here.

On a semi related note, I'm not at all happy with the allocation of tens of millions of euros to Galway county council to purchase second hand houses for the purposes of affordable housing in the last few weeks. Affordable housing is great, don't get me wrong, but that is taxpayer money that is being used to buy houses at or just below market cost. Grossly inflated market cost. Thus, taxpayer money that is being used to directly bail out specuvestors, as we speak.

Sarsfield wrote:

We also end up with more family homes than we need because so many are under-occupied. This builds up an unnecessary and inappropriate housing stock. Which eventually leads to a crash.

Are you seriously trying to say that old people living in their family homes caused the crash? Not historically low interest rates and epic amounts of profiteering by unscrupulous banks and well financed real estate agents, combined with corruption, and greed on the part of the construction industry?

Sarsfield wrote:

Maybe a way could be found to make it an attractive option for empty nesters to sell up an move to a smaller and more appropriate dwelling?

Or maybe you stop grasping at straws and give credit where credit is due...

Lemming

Sarsfield wrote:

It's the problem of empty nests. Central suburbs in Dublin (and possibly other cities?) have extremely low density because the kids have grown up and been forced to move way out of town due to lack of availability of more central homes. These central homes are occupied by 1 or 2 elderly people. We end up with sprawl and nightmare commuting distances. We also end up with more family homes than we need because so many are under-occupied. This builds up an unnecessary and inappropriate housing stock. Which eventually leads to a crash.

Without expressing an opinion on "forcing" old people out, it would greatly increase the availability of housing in places where younger people with families need to be. This would reduce the need for sprawl, reduce the excess of larger homes, reduce commuting times & costs, and have positive economic and social benefits.

Maybe a way could be found to make it an attractive option for empty nesters to sell up an move to a smaller and more appropriate dwelling?

one fundamental point to note ..... even assuming that old people were "forced" out of what have been their homes for decades (and I have a serious problem with telling someone they have to leave their home), "young families" still wouldn't be able to move back into more central areas of Dublin anyway since the house prices are so exhorbitant as it stands. So all you do is force someone out of their home so it can be .... vacant for a long time.

Old people in family homes are not the problem here. They are, however, an easy target for anyone looking to create a good soundbite to pander to the masses.

Afuera

Victor wrote:

I'm not picking on old people. I'm picking on people with excess property.

Would a property tax on vacant properties not make more sense?

As for the suggestion that urban sprawl is caused by empty nests, I strongly disagree. It is caused by bad planning.

newestUser

Lemming wrote:

Old people in family homes are not the problem here. They are, however, an easy target for anyone looking to create a good soundbite to pander to the masses.

This may be true. However, what odds that after David McWilliams' next book comes out (The Generation Game), half the young people in the country will be saying things like this, and quoting his book as if it were gospel?

Roll on the Generation-X style oldie bashing!

SimpleSam06

Lemming wrote:

Old people in family homes are not the problem here. They are, however, an easy target for anyone looking to create a good soundbite to pander to the masses.

I wouldn't worry to much about it tbh... They are the only demographic that votes!