Property Market 2015

Michael D Not Higgins

There was a woman on George Hook's Newstalk programme last evening representing some landlords group. She gave the most ludicrous example of someone paying tax at the marginal rate on a property they have no mortgage on and then including deductible items like maintenance without deducting them from tax as a way of saying landlords only get 23% of the rent into their hands. This, after she already had only just said that over 70% landlords have mortgages on their BTL properties.

The_Conductor

Michael D Not Higgins wrote: »

There was a woman on George Hook's Newstalk programme last evening representing some landlords group. She gave the most ludicrous example of someone paying tax at the marginal rate on a property they have no mortgage on and then including deductible items like maintenance without deducting them from tax as a way of saying landlords only get 23% of the rent into their hands. This, after she already had only just said that over 70% landlords have mortgages on their BTL properties.

I fully accept what you're saying- but lets flip this the other way. Landlords who have been prudent and paid down their mortgages- instead of being feted by the media for their prudence- are instead fleeced by the tax man. The reason we have so many BTL mortgages up the swanney and the pained taxpayers of this country of ours on the hook for them- is because of government taxation policy- which dictates that the best way a landlord can shield income- is by loading up on as much debt as possible.

This cannot be right.

Michael D Not Higgins

The_Conductor wrote: »

I fully accept what you're saying- but lets flip this the other way. Landlords who have been prudent and paid down their mortgages- instead of being feted by the media for their prudence- are instead fleeced by the tax man. The reason we have so many BTL mortgages up the swanney and the pained taxpayers of this country of ours on the hook for them- is because of government taxation policy- which dictates that the best way a landlord can shield income- is by loading up on as much debt as possible.

This cannot be right.

Well the next problem I had with it was they used this 23% figure to show the mortgage wasn't affordable because you can't get a €230 mortgage on a 2 bed rented for €1000 per month. Maybe they shouldn't get into rental properties then.

Sure the tax system could be fairer, and some accidental landlords are being punished on negative equity houses they have to rent out and pay rent somewhere else. But I think it's a bit rich to complain about the top up to meet the mortgage payment if it means they're only paying a fraction of the cost of the asset anyway.

As an example, they gave a property worth 200k getting 1k per month and not being able to get a 230 per month mortgage. Now for my own calcs. The mortgage could be €818 but after some back of the envelope calculations, the landlord is only topping up to meet the mortgage by 260 per month. Ignoring interest rate changes and increases in rental income (let's imagine the rent increase meets the additional tax due because of lower interest paid), at the end of a 25 year mortgage they paid 78k for their initially valued 200k property, probably 300+k at the end of the 25 years.

Now, it's probably only 10k a year and it's all tied up in equity but it's not exactly hard work for 10k after tax. And that's in an unfavourable position! We could include rent increases, inflation and a potential bad tenant that causes damage/doesn't pay rent to the mix but I still see a landlord coming out with a sizeable asset at the end.

It would make more sense for landlords to argue that the system provides valuable accommodation to the public and not everyone can just get a mortgage so it makes sense to provide through private rentals and the government should enable landlords to do this with a fair system. Skewing the figures to make it seem like the landlord is losing money doesn't reflect well.

Floodzie

Michael D Not Higgins wrote: »

I still see a landlord coming out with a sizeable asset at the end.

I'll let someone else take you to task over your figures :-) but just on the point above, for an accidental landlord one of the major problems is that they often cannot get a mortgage for any other property as the banks will still see them as having maxed out their credit (i.e. 3.5 times their salary) buying the first property.

So while they may be coming out with a sizeable asset at the end, in the interim they are renting out their place, and renting somewhere else. Or they are back living with the parents, at least until the negative equity is paid down - and for some people that can be a very long time. Not a great situation. I don't know of a single accidental landlord (and I know a few) who wouldn't rather be shot of their 1 or 2 bedroom apartment, so they can just buy a simple family home.

Michael D Not Higgins

Floodzie wrote: »

I'll let someone else take you to task over your figures :-) but just on the point above, for an accidental landlord one of the major problems is that they often cannot get a mortgage for any other property as the banks will still see them as having maxed out their credit (i.e. 3.5 times their salary) buying the first property.

So while they may be coming out with a sizeable asset at the end, in the interim they are renting out their place, and renting somewhere else. Or they are back living with the parents, at least until the negative equity is paid down - and for some people that can be a very long time. Not a great situation. I don't know of a single accidental landlord (and I know a few) who wouldn't rather be shot of their 1 or 2 bedroom apartment, so they can just buy a simple family home.

The accidental landlord is a situation I agree needs to be dealt with. I'm taking about actual investor landlords here.

headtheball14

Why would anyone use up their site today building and selling any houses or apartments when there is no cost (besides interest) to hold the site and hope for changes to building regulations or tax incentives that will allow more profit in the coming years. And holding the site helps to raise the prices and increase the pressure to change regulations in your favour

The_Conductor

headtheball14 wrote: »

Why would anyone use up their site today building and selling any houses or apartments when there is no cost (besides interest) to hold the site and hope for changes to building regulations or tax incentives that will allow more profit in the coming years. And holding the site helps to raise the prices and increase the pressure to change regulations in your favour

A cumulative site tax (that increases for every year a site is left undeveloped) is coming in on undeveloped sites- thats why. I'll see if I can find the details.

helimachoptor

signed for our house yesterday, closing friday 3 weeks.

Has been a frustrating experience with BOI tbh, constant moving goalposts, new copies of everything each month even though they are delaying things but almost there.

Now once we get in, 2 months of renovation work :eek:

gaius c

The_Conductor wrote: »

I fully accept what you're saying- but lets flip this the other way. Landlords who have been prudent and paid down their mortgages- instead of being feted by the media for their prudence- are instead fleeced by the tax man. The reason we have so many BTL mortgages up the swanney and the pained taxpayers of this country of ours on the hook for them- is because of government taxation policy- which dictates that the best way a landlord can shield income- is by loading up on as much debt as possible.

This cannot be right.

The reason we have so many BTL mortgages up the swanney is because the people taking out those mortgages over-borrowed.

Retrospectively changing tax laws to protect dumb investors from the full extent of their own stupidity is a band aid for the original problem, not a real solution.

Michael D Not Higgins

gaius c wrote: »

The reason we have so many BTL mortgages up the swanney is because the people taking out those mortgages over-borrowed.

Retrospectively changing tax laws to protect dumb investors from the full extent of their own stupidity is a band aid for the original problem, not a real solution.

The only people I feel any sympathy for are the accidental landlords. Those who have had to rent out because of moving for a job, because of a growing family, etc. and with negative equity. They're the ones being crucified by the tax system for an investment they never planned.

The strategy from the government has been to get REITs to take over the private rental market, not provide support to the bad investments of current landlords. If their investments are not performing they can cut their losses. I've already shown from some simple calculations that even in a poor state of affairs, the equity the landlord is building outweighs the mortgage top up.

Bob24

gaius c wrote: »

The reason we have so many BTL mortgages up the swanney is because the people taking out those mortgages over-borrowed.

Retrospectively changing tax laws to protect dumb investors from the full extent of their own stupidity is a band aid for the original problem, not a real solution.

I am not sure this is what he is suggesting though. He might rather talk about situations where people are encouraged to take up more debt in order to be entitled for more tax incentives.

ionapaul

helimachoptor wrote: »

signed for our house yesterday, closing friday 3 weeks.

Has been a frustrating experience with BOI tbh, constant moving goalposts, new copies of everything each month even though they are delaying things but almost there.

Now once we get in, 2 months of renovation work :eek:

Congrats and the best of luck with it all! We're in just over a month now and any work we've needed done has been pretty rewarding to be honest.

draiochtanois

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gaius c

draiochtanois wrote: »

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If they come down, landlords will receive more rent into their pockets and tenants rent will not change one iota. Why would a landlord willingly reduce their own margin for charity purposes? It's a business and they are entitled to maximise the profit they make by legitimate means.

I don't particularly see lobbying to have tax laws changed to suit themselves as legitimate means. We're a high tax country with a history of adding sneaky taxes at short notice. If a landlord's business model is so tight that even the smallest change in taxes tips them over the edge, then it wasn't a very good business model in the first place. Taxpayers should not be subsidising their bad business decisions.

What we do need is more supply and there are a number of factors here, one of which is building more in places people would like to live.

draiochtanois

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gaius c

draiochtanois wrote: »

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You completely misunderstand supply & demand. Landlords only get to "pass on" charges if supply is tight or demand is high (like at present).

For example, interest rates were increasing right up to 2009 while rents had been falling for a year at that stage.

Crude oil cost is completely independent of the price paid at the pump. That's why expensive wells have to shut down when the price drops.

A more correct statement would be:

margin = what the renters pay - capital repayment - interest - taxes - management fees- repairs

And that figure can easily be a negative number. If it is, it's not really the taxpayer's concern.

The_Conductor

gaius c wrote: »

You completely misunderstand supply & demand. Landlords only get to "pass on" charges if supply is tight or demand is high (like at present).

For example, interest rates were increasing right up to 2009 while rents had been falling for a year at that stage.

Its not unheard of for landlords to make a loss- it is a business like any other- and increasingly, despite rents being as high as they currently are- difficult to make a living in the sector.

draiochtanois

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draiochtanois

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gaius c

draiochtanois wrote: »

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No. What makes prices high at the pumps is supply > demand, which is the situation at present.

The shale oil plants then shutting down are as a result of the low oil prices, not the cause of it. That restriction of supply will prevent prices from dropping further or may even bring them back up.

The_Conductor

Moderator note:

Guys- if you want to discuss the component cost of oil and its derivatives- consumer prices, supply and demand, crude, refined products and their seasonal demand patterns (will I go on........) take it elsewhere please.
I may find it interesting- and a small cohort of other forum users may likewise be interested- we are however in the minority- and it is so far outside the remit of this forum that its preposterous to discuss it here.

Please- get back on topic.

Mumha

Does anyone have a take on the numbers of properties for sale in the Glasheen, Wilton, Bandon Road, Magazine Road areas of Cork City ? I would have thought quite a few look like they were already rented properties, and if that was the case, why would landlords be selling now, when the rents are rising ? Certainly there are a lot of For Sale properties in the immediate area of UCC.

alastair

Mumha wrote: »

Does anyone have a take on the numbers of properties for sale in the Glasheen, Wilton, Bandon Road, Magazine Road areas of Cork City ? I would have thought quite a few look like they were already rented properties, and if that was the case, why would landlords be selling now, when the rents are rising ? Certainly there are a lot of For Sale properties in the immediate area of UCC.

Bedsits, or otherwise running foul of the new rental legislation? That's been the primary cause of shifting rental / pre-63 properties in Dublin anyway.

handlemaster

http://www.irishtimes.com/news/politics/fianna-f%C3%A1il-derides-rural-relocation-scheme-as-crazy-1.2322917

FF still going for the vote pleaser nothing much to entice Landlords . More for the renter will not help encourage landlords into the market

Mumha

alastair wrote: »

Bedsits, or otherwise running foul of the new rental legislation? That's been the primary cause of shifting rental / pre-63 properties in Dublin anyway.

Yes most of the ones around UCC would definitely be pre-63 alright.

gaius c

Mumha wrote: »

Does anyone have a take on the numbers of properties for sale in the Glasheen, Wilton, Bandon Road, Magazine Road areas of Cork City ? I would have thought quite a few look like they were already rented properties, and if that was the case, why would landlords be selling now, when the rents are rising ? Certainly there are a lot of For Sale properties in the immediate area of UCC.

Banks are pushing landlords in arrears to sell.

Mumha

gaius c wrote: »

Banks are pushing landlords in arrears to sell.

That's going to be a continuous issue for a while then.

The_Conductor

Mumha wrote: »

That's going to be a continuous issue for a while then.

Its only an issue for landlords who are in arrears- who, as a cohort, are not increasing in number any longer (esp. as its become obvious that courts are playing ball with lenders and allowing rapid repossessions of non-PPRs). So- its a clean out and a clean up exercise- a short sharp shock, as it were. Its not going to be a continuous exercise- its a concerted effort to clean up delinquint loans on non-PPR properties- its expected to clear the vast majority of them within 14-16 months- at the same time ramping up on PPRs that are in difficulties (though this obviously isn't going to happen this side of the election).

mel123

I think we can defiantly see prices declining now, well anything im getting in from myhome is nearly all price reductions, anyone care to predict what way they think it will go and by how much?

slowjoe17

gaius c wrote: »

If they come down, landlords will receive more rent into their pockets and tenants rent will not change one iota. Why would a landlord willingly reduce their own margin for charity purposes? It's a business and they are entitled to maximise the profit they make by legitimate means.

I don't particularly see lobbying to have tax laws changed to suit themselves as legitimate means. We're a high tax country with a history of adding sneaky taxes at short notice. If a landlord's business model is so tight that even the smallest change in taxes tips them over the edge, then it wasn't a very good business model in the first place. Taxpayers should not be subsidising their bad business decisions.

What we do need is more supply and there are a number of factors here, one of which is building more in places people would like to live.

If tax charges come down, in the instant, you are correct.

In theory, there would be more places available to rent since renting out would become more attractive. Importantly for builders, in the current market, there would be buyers for starter flats to make up for the fact that so many are now deposit-blocked.

But it would be a tiny effect compared to the fact that the country isn't building enough homes to meet population changes.

It's the same with the suggestion about downsizing. Imagine a though experiment where EVERY empty-nest couple downsized and moved to Kerry or Roscommon. There might be 5 years supply of housing deficit right there. But after 5 years, the lack of building would start the whole housing-crisis process again.