Should a house ever be considered an investment

karen3212

I was watching an interesting programme the other night, and there was a woman on saying that homes and houses should never become investments.

She meant that all tax advantages should be stripped, so as that houses and homes never become investment vehicles for people.

As land gets tighter and populations grow though, is it possible to ensure that residential houses never become investments for people?

All opinions and suggestions welcome.

I believe they should never have been allowed become investment vehicles.

BlackIguana

Interesting viewpoint but having thought about it I don't think it could ever would work or would necessarily be a good thing...

Reasoning is this:

* There will always be a set of the population who want to rent.
* This has many advantages for society - flexibility of workforce, young people gaining experience from living different parts of the country/world, etc
* So the need to provide homes for these renters to live in will always be there - ergo we need people to own investment properties.

Any 'state' solution - eg state owning houses and renting to people is just not viable.

In relation to tax breaks - these do serve to rejuvenate areas, provide unemployment etc. So though they distort the property market they also do a lot of good.

Cheers.

karen3212

I understand what you are saying, but I think it has become ridiculous,

people are basically being encouraged to make their home their main investment vehicle.

I think they should be encouraged to make full use of their pension limits, shares etc first.

I understand some people would always invest in property anyway, so there would be plenty of rental places, people buy and rent out their homes when they travel too.

Couldn't the state kick in by building decent high-rise inner city properties, sound proofed, with balconies for those who want to rent too.



Edit, Yes though you are right about run down areas - I would allow tax advantages for those on first purchase, I would exclude them again once that person sells them on.

TCollins

karen3212 wrote:

I understand what you are saying, but I think it has become ridiculous,

people are basically being encouraged to make their home their main investment vehicle.

I think they should be encouraged to make full use of their pension limits, shares etc first.

I understand some people would always invest in property anyway, so there would be plenty of rental places, people buy and rent out their homes when they travel too.

Couldn't the state kick in by building decent high-rise inner city properties, sound proofed, with balconies for those who want to rent too.



Edit, Yes though you are right about run down areas - I would allow tax advantages for those on first purchase, I would exclude them again once that person sells them on.

I dont believe people are making there home an investment vehicle. If they have a second home then that is an investment. You should look up the definition of investment.

I for one am glad that there are people who invest so that i can rent where i want to. Would rather own my own house but am still waiting for that to happen. It will be my home, not an investment, as if i sell i still need to shell out on another place to live.

Unless there is a bob or 2 in this for the investor this would not happen.

karen3212 wrote:

Couldn't the state kick in by building decent high-rise inner city properties, sound proofed, with balconies for those who want to rent too.

Why would the state kick in when they can get investors to do this by allowing the investors business expenses to be deducted just like any other business? Perhaps the govt can supply good cars for us all to rent too instead of allowing car hire firms to provide this service

karen3212

TCollins wrote:

I dont believe people are making there home an investment vehicle. If they have a second home then that is an investment. You should look up the definition of investment.

I for one am glad that there are people who invest so that i can rent where i want to. Would rather own my own house but am still waiting for that to happen. It will be my home, not an investment, as if i sell i still need to shell out on another place to live.

Unless there is a bob or 2 in this for the investor this would not happen.



Why would the state kick in when they can get investors to do this by allowing the investors business expenses to be deducted just like any other business? Perhaps the govt can supply good cars for us all to rent too instead of allowing car hire firms to provide this service

I think you'll find there is way more than a bob or two in it for the investor. Honestly I own my home, so I am not saying this out of selfishness.

Also the state already does affordable housing, what's wrong with them making some of that for rental purposes only.

And many people will still only invest in property because that is what they know.

And a lot of people make their home their pension, rather than using a real pension.

Other countries do it, why can't we?

johnnyskeleton

karen3212 wrote:

Also the state already does affordable housing, what's wrong with them making some of that for rental purposes only.

They do - council housing. The problem is that there are more people that want this accomodation than there are places.

And a lot of people make their home their pension, rather than using a real pension.

This would be a bad idea. Unless you want people renting rooms in your house - which is a very unreliable source of income - you won't make much money out of your home as an investment. You would be basically selling your home and buying a cheaper home either in a worse area or abroad.

Other countries do it, why can't we?

Do what exactly?

I see where you are coming from, but I don't think people can be stopped from investing in property. If anything, there is a lack of good rental accomodation, and if you want to live in Dublin city centre for under 100e pw, you'll probably be in very cramped conditions.

iguana

johnnyskeleton wrote:

This would be a bad idea. Unless you want people renting rooms in your house - which is a very unreliable source of income - you won't make much money out of your home as an investment. You would be basically selling your home and buying a cheaper home either in a worse area or abroad.

In fairness lots of people do this. It's called down-sizing. Not necessarily as a pension, but plenty of people exchange their 4 bed-family house for a 2 bed bungalow, or similar, as they don't need, or can't manage, a big house anymore.

johnnyskeleton

iguana wrote:

In fairness lots of people do this. It's called down-sizing. Not necessarily as a pension, but plenty of people exchange their 4 bed-family house for a 2 bed bungalow, or similar, as they don't need, or can't manage, a big house anymore.

I would say that the decision to downsize is made at the time rather than looking into the future - and I don't think many people buy a large house with the intention of downsizing when they retire. More likely, it is because of a change of cirumstances that they would downsize.

iguana

johnnyskeleton wrote:

I would say that the decision to downsize is made at the time rather than looking into the future - and I don't think many people buy a large house with the intention of downsizing when they retire. More likely, it is because of a change of cirumstances that they would downsize.

I don't know, my parents have always talked about the possibility of downsizing, even back when I was a kid. They'd want to stay in the same area, and while they have no plans to move any time soon it's still something that they feel open to.

I don't even have kids yet, but I think about downsizing when they move out. I'm only 28 and I'm crap at keeping my house clean, god knows what I'll be like by 68.;)

karen3212

johnnyskeleton wrote:

Do what exactly?

I see where you are coming from, but I don't think people can be stopped from investing in property. If anything, there is a lack of good rental accomodation, and if you want to live in Dublin city centre for under 100e pw, you'll probably be in very cramped conditions.

Oh yes, I should have explained that, bring in tax laws that make using residential property/your home, as a place to store wealth and pass it on to your next of kin when you die. Or a place to store wealth that can be used when you retire.

I know many people who buy bigger and bigger homes they don't need at all, just so as that they can sell when they are in their sixties and so shore up a pension for themselves.

I am not saying we stop investment in residential property, I think that is impossible.

Just that we enact laws that make it less attractive as an investment vehicle.

johnnyskeleton

I think that people's accomodation needs fluctuate over the course of their lives. They might live in a flash city centre apartment in their 20s, settle into a nice suburban house when in their 30s and have kids, when the kids move out move into a smaller suburban house, and then when they retire they might move to the country or to Spain. But this is, or at least IMO should be, for their own personal reasons or for a change in circumstances, rather than as a planned pension fund.

While moving up and down the property ladder is part of modern life (as opposed to the days of country seats or working off your grandfather's 99 year mortgage), I would consider it to be very ill advised to buy a larger home solely or primarily with the intention of downsizing at a later date and using the surplus as a pension. More sensible, in my view, would be to own a home that meets your requirements, and put any additional funds into a rental property. This rental property will generate an income, and will also be easier to sell if the funds are needed sooner rather than later (e.g. before the kids grow up).

antoinolachtnai

You haven't really explained why you think investment in property is a bad idea. What exactly are the negative results of it?

If property shouldn't be an investment vehicle, what about other things? What makes shares or bonds superior to property as an investment?

karen3212

antoinolachtnai wrote:

You haven't really explained why you think investment in property is a bad idea. What exactly are the negative results of it?

If property shouldn't be an investment vehicle, what about other things? What makes shares or bonds superior to property as an investment?

Well, I suppose talking about Ireland really, a lot of our laws are inflating the cost of buying a home. Now, a lot of people say, well people can rent if it's too expensive, and I say yes, but in Ireland renting is shorter term and more insecure than other countries.

So the laws re renting = encourage buying
A principal private residence free of Capital gains tax = encourage buying the biggest and increasing as you go
Other laws eg writing off expenses against income = inflate house prices
Interest relief on mortgage payments = inflate house prices

I think homes and places to residential property should not be so attractive as a savings vehicle,

Buying shares in companies that do research, science, new technology, sell products made here around the world etc. etc. should be encouraged via tax laws.........this would be better for the country imo, and also deflate the money carrying capacity of residential property. more people could then affort a home, and it wouldn't really be seen as an investment.

Of course better financial education to go with it too.

antoinolachtnai

The property business has been good for Ireland in many respects. A lot of money has been ploughed into the housing stock and overall, it is better than it was 20 years ago.

We also have stamp duty which strongly discourages speculation. Further, our planning and building regulations are getting tougher and tougher.

Maybe the problem is tenure rather investment?