Stamp Duty Proposals

Seth Brundle

With many parties promising no or lower stamp duty rates if they get into government, Im wondering what they plan on putting in place of SD. Will they introduce some form of property tax or what afterwards?
thoughts?

They'll probably increase capital gains tax back up to 40% and introduce it on the selling of the family home.

Glenbhoy

kbannon wrote:

With many parties promising no or lower stamp duty rates if they get into government, Im wondering what they plan on putting in place of SD. Will they introduce some form of property tax or what afterwards?
thoughts?

Like they've thought that far ahead!!

No, tbh, stamp duty is a red herring, the proposed changes to SD will only cost a few euro a year, (I think FTB SD contributes approx than 80m), residential property SD brings in circa 1bn in total (both figues guestimates, that I seem to remember), overall, it's not that much - but for some reason it's what everybody is focusing on, luckily for all concerned imo, since they're all also promising reduced income taxes, and that genuinely concerns me - classic petrol on the fire policy.

ircoha

If so then the FTB'rs are in for a big surprise.

The way the market works is based on ability to pay.

What this means is that if you, as a FTB'r dont have to pay 40k on SD then that means you can pay 40k more for the house and the 40k goes to the builders.

The effect of this is in fact that the price goes up for everybody and makes it even more difficult for non-FTB'rs

SD should be paid by the seller and not the buyer. This would mean that at least the SD will go to the Government and not the builders.

Builders are the greatest threat to our democracy as evidenced by:
1 the corruption of the planning process
2 the Govt capitulation on the 20% affordable housing which has led to the creation of multi-racial enclaves which in turn will lead to the formation of ghettos, with all the attendant issues.

Glenbhoy

If so then the FTB'rs are in for a big surprise.

The way the market works is based on ability to pay.

What this means is that if you, as a FTB'r dont have to pay 40k on SD then that means you can pay 40k more for the house and the 40k goes to the builders.

The effect of this is in fact that the price goes up for everybody and makes it even more difficult for non-FTB'rs

SD should be paid by the seller and not the buyer. This would mean that at least the SD will go to the Government and not the builders.

It's very very rare for a ftb to be in a position where they'll pay SD on a new build, hence, if, and it's a massive if, the price of property were to be uplifted by the reductions in sd, the amount which previously was to have been paid in sd, will now be paid to the vendor (which will be a homeowner). In fact, it could be said that the one thing that changes to sd for ftb's would do is decrease the money going to builders, this is because, at present, new builds are overpriced in comparison to 2nd hand dwellings as there is no sd payable on them. The bank will then pay 100% of the cost, making it easier for a ftb to get on the property ladder, but only when they're buying new builds, thus if the same proviso applied for 2nd hand dwellings, then the comparative price for ftb's would fall (not that clear I know, but it'll do).

Builders are the greatest threat to our democracy as evidenced by:
1 the corruption of the planning process
2 the Govt capitulation on the 20% affordable housing which has led to the creation of multi-racial enclaves which in turn will lead to the formation of ghettos, with all the attendant issues.

Indeed, the single biggest threat to our democracy!!

johnnyskeleton

I agree with the majority which is that no stamp duty = higher prices.

If the government wanted to make it easier for FTBs they would put more effort into affordable housing, tax relief and make these things of real assistance and not just drops in the ocean.

But in regards to the OP, there is a logical gap in your question:

With many parties promising no or lower stamp duty rates if they get into government, Im wondering what they plan on putting in place of SD. Will they introduce some form of property tax or what afterwards?
thoughts? (emphases added)

Do you have any reason to suspect that they will actually follow through on their promises, because I don't think so? But you are right in pointing out that they are not proposing anything that will take its place.

Villain

I think changes to Mortgage Interest Relief based on means testing is the way to go to be honest.

gandalf

I agree with what's being said here, if Stamp duty is scrapped prices will go up and the monies will go into the builders/developers/ their "friends" coffers.

What makes more sense is a rebate over 5 years for the FTB of the stamp duty paid which shouldn't inflate house prices for non-ftb'ers and give a boast to the first difficult years of repayments for FTB'ers.

I also like the Green Parties suggestion where people downsizing should not be subject to Stamp Duty under a certain threshold. It should give impetus to elderly people downsizing and freeing up larger property for families.

JHMEG

First 100% mortgages, then 40 year mortgages, and now stamp duty reform. Eventually there will be nowhere to hide from the huge over valuation of property in this country. Probably the sooner the better as the bigger they are the harder they fall and all that.

OTK

kbannon wrote:

With many parties promising no or lower stamp duty rates if they get into government, Im wondering what they plan on putting in place of SD. Will they introduce some form of property tax or what afterwards?
thoughts?

I expect that Fianna Fáil will announce changes to stamp duty shortly before the election so that the oppposition lose their best known proposal.

One characteristic of a property market crash is a huge fall in the number of transactions while buyers wait for further reductions and sellers can't bring themselves to sell at a loss. The state will lose stamp duty revenue at this point no matter where the rates are pegged.

It would be politically impossible to introduce a property tax in Ireland.

The property boom has brought a huge tax windfall to the state but it has to stop some time.

Seth Brundle

Why do you think it would be politically impossible?
Given that we are extremely poor at protesting and also have short memories come election time, I think it is something easily arranged politically!

OTK

kbannon wrote:

Why do you think it would be politically impossible?
Given that we are extremely poor at protesting and also have short memories come election time, I think it is something easily arranged politically!

We had residential property tax from the early 80s to 1997. Despite the fact that only a tiny number of people paid it due to high exemption limits and widespread undervaluation, there was enormous political opposition to it. The kind of person who had a house so valuable they couldn't avoid paying the tax tended to be the kind of person with influence in society. When the tax was eventually abolished you would have thought from the media coverage that it was raising billions yet it earned less money in its last year than VAT on ice cream. It would take a strong man taoiseach to introduce a tax like this with a huge dáil majority, as thatcher managed with the poll tax.

In general, it's best if taxes dissuade people from doing bad things or just charge them for unnecessary luxuries. Living in an average priced house is hardly something you want to dissuade people from doing.

I'd be very happy to see a high tax on unoccupied dwellings to encourage people to rent them out or sell them and thus lower rents and house prices.

There's a lot of scope for green taxes such as energy use, ownership and purchase of energy inefficient devices, pollution taxes etc etc

ninty9er

The big issue in Ireland is that everybody, (myslef included), have this ingrained idea that we must own our home. We have the highes home ownership rate in Euorpe if not the world.

This would be a non-issue in most European countries as people rent in the majority.

All the same, announcing changes to the stamp duty system months or even years before they are brought to bear is absolutely unnecessary and has already destabilised the housing market. Announcements like this should have been kept until the week of the election or not made at all.

Prices will not fall as a result!!

Glenbhoy

ninty9er wrote:

This would be a non-issue in most European countries as people rent in the majority.

I don't think that's quite true - even if were, there are very solid reasons for it - namely, the difficulty there used to be in obtaining mortgage finance - that has changed throughout Europe with the opening up of financial markets, with the result that countries such as Spain, Italy, France have all experienced property booms of one sort or another over the past decade. Fundamentally, it is not desireable for persons never to be in the position to own their own homes, that simply perpetuates the ill distribution of wealth within a society. I worked with many Italians, and let me assure you, not one of those who rented did so out of lack of desire to own their own home, they did so because mortgage conditions were ridiculous, 40% deposit and then two times their income was the norm!!

ircoha

Copyright 2007 The Irish Times
All Rights Reserved
The Irish Times

April 21, 2007 Saturday

SECTION: IRELAND; Other Stories; Pg. 5

LENGTH: 556 words

HEADLINE: Developer warns of divided society and ghettoisation

BYLINE: Frank McDonald, Environment Editor, in Kilkenny

BODY:


The health of the community has suffered because "the main party in Government is too closely linked to the construction industry" and does not put the interests of society first, according to unconventional property developer Mick Wallace.

Addressing the Irish Planning Institute's annual conference in Kilkenny, he said the Government had "backed down" under pressure from builders and developers on the affordable housing provisions of Part V of the 2000 Planning Act.

Instead of having to allocate 20 per cent of housing schemes for social and affordable homes, they were being "allowed to move quotas around to maximise their profits. As a result, ghettoisation continues, and that's very sad."

Mr Wallace said even in cases where housing was mixed, lower quality materials were being used for the social and affordable element than for the private units.

"That's just crazy, and it shouldn't be allowed," he told nearly 300 planners.

There was no supervision of construction standards, "and if you go around Dublin and look, there's more bad work than good, unfortunately". This showed that self-regulation by architects and engineers had failed.

Even though he was a beneficiary of the Section 23 tax incentive scheme, it had been "kept on far too long", with the result that most apartments were bought by investors and this militated against the development of community spirit.

Referring to his development on Ormond Quay, Dublin, Mr Wallace conceded that most of the 33 apartments there had been bought by investors. "But we've tried to create a community spirit in other ways; built around a pedestrian street."

He had retained six of the eight commercial units, including wine bars and coffee shops. "If I had just sold to the highest bidder we would have ended up with a Centra, a bookies' office and a takeaway, and the scheme would not have worked as well."

Irish society had become much more materialistic, and people were now "more solitary than social, with no sense of responsibility for our fellow man".

He said politicians might claim credit for a strong economy, but they were less good at building a good society.

Mr Wallace said he had bought an apartment in Turin 10 years ago "for the price of a parking space in Dublin". He was able to contrast the lack of social ghettoisation there with the "very class-conscious, very divided" society in Ireland.

Whereas Dublin's home ownership level was above 80 per cent, it was only 15 per cent in Turin.

"There's a huge rental market and it works very well for them. They don't have our obsession with ownership, and their quality of life is way ahead of our own."

The courtyards of apartment blocks in Dublin were dead zones, but in Turin they would be "full of life, with kids playing in them".

Balconies in Italy were big enough to live on, but here they were "just token gestures".

Most housing in Dublin was being built without playing pitches or social facilities.

"You have to go to a place that sells alcohol to meet anyone in this country. If we're going to build communities, the Government should be playing a leading role."

Another developer, Dominic Doheny, director of John Flanagan Developments, told the conference that some restriction should be placed on the growth of Dublin so that other gateways identified in the National Spatial Strategy could get a chance to grow.

LOAD-DATE: April 21, 2007


Your use of this service is governed by Terms and Conditions. Please review them.
Copyright ©2007 LexisNexis Group a division of Reed Elsevier (UK) Ltd. All rights reserved.

Glenbhoy

Home ownership in Italy is 76%, so I don't know where Mick gets his figures, pretending he was correct and it was actually 15%, would that not be an extremely undesireable situation - reminiscent of ireland 150yrs ago??
http://www.borg.hi.is/enhr2005iceland/ppr/Mulder.pdf
See P.14 in the above link for home ownership figures.

johnnyskeleton

I believe that renting is fine, provided it is significantly cheaper/less responsibility than getting a mortgage. A few years ago, monthly rent would be less than the monthly mortgage on a place. Up till maybe last year, rent was just slightly less, and over the next few months we might see it increasing over mortgage repayments again.

So as to why Irish people prefer to buy, it's not just history but the current situation. When faced with the options of a) rent and pay someone else's mortgage or b) get a slightly higher mortgage but own the house then there's not much choice. But if you could get in Dublin the fancy apartments like ones described in the article at a realistic price, then a lot more people would rent.

ninty9er

johnnyskeleton wrote:

I believe that renting is fine, provided it is significantly cheaper/less responsibility than getting a mortgage. A few years ago, monthly rent would be less than the monthly mortgage on a place. Up till maybe last year, rent was just slightly less, and over the next few months we might see it increasing over mortgage repayments again.

So as to why Irish people prefer to buy, it's not just history but the current situation. When faced with the options of a) rent and pay someone else's mortgage or b) get a slightly higher mortgage but own the house then there's not much choice. But if you could get in Dublin the fancy apartments like ones described in the article at a realistic price, then a lot more people would rent.

I agree that the rental situation is ludicrous at the moment, but there are plenty of vacancies so people should really shop around

(sp: edit)

Victor

Glenbhoy wrote:

Home ownership in Italy is 76%, so I don't know where Mick gets his figures, pretending he was correct and it was actually 15%, would that not be an extremely undesireable situation - reminiscent of ireland 150yrs ago??
http://www.borg.hi.is/enhr2005iceland/ppr/Mulder.pdf
See P.14 in the above link for home ownership figures.

Its possible there is a stark difference between urban / rural and between north / south.

Glenbhoy

Possibly Victor, I lived in the north for several years and I would have been one of the few tenants in any apartments I lived in. You also have a lot of housing associations owning apartment blocks, but most of the apartment dwellers would have a share in the housing association - complicated, but it wouldn't be Italy if it wasn't complicated:)
The one thing I do know for certain, is that in both Spain and Italy, new entrants to the mortgage market are changing the old rules and young people are trying to buy if at all possible. The big difference is that Italians will buy an apartment and see that as being their home for a long time, Irish people see it as a stop gap.
Another thing, Mick Wallace states that their quality of life is way ahead of ours - I certainly don't agree with that statement, there are advantages, but imo the many, many disadvantages far outweigh the advantages.

Bottle_of_Smoke

Reckon the green party's idea of giving exemptions to those trading down is the best idea. Fine Gael & Labour are really pissing me off with their policy proposals.

ircoha

See http://www.rte.ie/news/2007/0423/qanda.html

questions and answers from 23rd April 2007

Glenbhoy

ircoha wrote:

See http://www.rte.ie/news/2007/0423/qanda.html

questions and answers from 23rd April 2007

The sellers referred to by Brian Cowan are not builders ircoha, as I stated earlier in this thread, currently residential buyers do not pay stamp duty on newly built homes (except in extreme circumstances). As I stated earlier, it may actually be that builders will lose out to an extent, in that ftb's will no longer be restricted to buying new builds, thus decreasing demand for them and further depressing their price.

Seth Brundle

Glenbhoy wrote:

As I stated earlier, it may actually be that builders will lose out to an extent, in that ftb's will no longer be restricted to buying new builds, thus decreasing demand for them and further depressing their price.

But if the builders lose out then FF will surely lose money from donations? We can't have that, can we?

Glenbhoy

kbannon wrote:

But if the builders lose out then FF will surely lose money from donations? We can't have that, can we?

Well spotted, interestingly, but unrelated, there is one political party who have pledged to retain the status quo re stamp duty - that party favour a system whereby rebates are made after the sale, normally via mortgage interest relief, that would protect the investments in land banks made by developers too wouldn't it??