Property Market 2016

gaius c

subpar wrote: »

Small landlords are treated in the tax system as a business, but yet get very few of the tax treatments of a business for example

They are taxed on gross rental income

---

not profit

They pay P.R.S.I. on the rental income.

They pay U.S.C. on the rental income.

They are not even allowed to write off a single hour of the time they work on renting / servicing / cleaning / repairing or sourcing fixtures or fittings for the rental property.

They are required to pay 100% of the P.R.T.B registration charge even though the P.R.T.B. are biased in favour of the tenant.

What is fair about that. Many of those renting out 1 or 2 properties are accidental landlords and not the greedy, evil, exploiting types often portrayed in the media.

If you want to be taxed as a business, run it like a proper business.
You can't have it both ways.

handlemaster

gaius c wrote: »

If you want to be taxed as a business, run it like a proper business.
You can't have it both ways.

Your saying landlords dont run their business like a business ! Why do you think they dont ?

Michael D Not Higgins

handlemaster wrote: »

Your saying landlords dont run their business like a business ! Why do you think they dont ?

He means set it up as a property management company instead of the tax accruing as an individual.

gaius c

Michael D Not Higgins wrote: »

http://www.daft.ie/report/ronan-lyons-2015q4-rental

Rental supply has dropped to nearly a quarter of 2008-2012 average levels in Dublin, and the rest of the country is even more stark in contrast, with nearly an 85% drop.

The conclusion is that something is holding back building of apartments and they're suggesting it's cost (we also know landlords are selling up in their droves). Someone I heard on Newstalk this morning was complaining about the cost of building as well, saying the new regulatory system requiring architects/chartered surveyors on site is also pushing up prices beyond affordable levels.

That's not entirely correct as daft is only taking account of supply that's available to rent. Long term lets that are not changing hands won't show up in their stats.

There was a report a while back stating that 8% of properties in Dublin city centre were empty. This is twice what you would expect for a developed first world city. It's almost certainly higher outside urban areas. In the middle of an accommodation crisis, it is deeply incongruous and suggests that the problem is a lot deeper than folks with an obvious VI are making out.

The market is broken because despite the falls from peak, buying is still out of reach for most of the market and the transaction rate is extremely slow as a result. This "forcing through the eye of a needle" that is going on is pushing folk into renting who would ordinarily have bought at affordable prices by now.

But this is all part of the plan. This is LTEV at work. This is what happens when you have a bust but expressly block firesales. We are through the looking glass and normal capitalism/market rules no longer apply.

gaius c

Michael D Not Higgins wrote: »

He means set it up as a property management company instead of the tax accruing as an individual.

Exactly. If you want to be treated like a proper business, run it like one.
You can't have your cake and eat it too.

Michael D Not Higgins

gaius c wrote: »

That's not entirely correct as daft is only taking account of supply that's available to rent. Long term lets that are not changing hands won't show up in their stats.

That would only make sense if longer lets were becoming the norm which, granted, could have some effect, e.g. people happy where they are and not moving especially when there's a crisis ongoing.

However, a drop of nearly 80% in daft's rental supply stats is not significantly due to longer lets. It's clear those 14,000 odd properties went somewhere and the obvious answer is on landlords selling up, increased demand and no additional supply.

The main blockage I see is the lack of supply. There is certainly a case to be made that people are sitting on empty properties to realise a better return as the market rises and an empty site tax should be encouraged in these instances. I know in London some new apartment blocks are empty because foreign billionaires buy them up as investment vehicles.

The builders then say the costs are too high which I think is probably them looking at it from their 2006 hats on comparing it to the building costs and sale prices then. There's a few things that have to happen, builders need to be more realistic about their margins, something needs to be done about the high costs and something needs to be done about the non-use of properties and sites. What these measures should look like is the tricky part.

godtabh

Michael D Not Higgins wrote: »

He means set it up as a property management company instead of the tax accruing as an individual.

So how does this work?

Is it a case of setting up a company with the CRO. Rent is paid into a company account and expenses paid out of that account?

Michael D Not Higgins

godtabh wrote: »

So how does this work?

Is it a case of setting up a company with the CRO. Rent is paid into a company account and expenses paid out of that account?

Not entirely sure to be honest. You'd have to speak to a tax lawyer or accountant.

Greyian

subpar wrote: »

Small landlords are treated in the tax system as a business, but yet get very few of the tax treatments of a business for example

They are taxed on gross rental income

---

not profit

They pay P.R.S.I. on the rental income.

They pay U.S.C. on the rental income.

They are not even allowed to write off a single hour of the time they work on renting / servicing / cleaning / repairing or sourcing fixtures or fittings for the rental property.

They are required to pay 100% of the P.R.T.B registration charge even though the P.R.T.B. are biased in favour of the tenant.

What is fair about that. Many of those renting out 1 or 2 properties are accidental landlords and not the greedy, evil, exploiting types often portrayed in the media.

If they set it up as a business, they'd still be paying income tax, USC etc on the wage they draw from the business.

godtabh

Greyian wrote: »

If they set it up as a business, they'd still be paying income tax, USC etc on the wage they draw from the business.

You dont need to draw a wage from it if you are working full time which I would say is the majority of 1 house landlords.

Goat Paddock

Michael D Not Higgins wrote: »

The builders then say the costs are too high which I think is probably them looking at it from their 2006 hats on comparing it to the building costs and sale prices then. There's a few things that have to happen, builders need to be more realistic about their margins, something needs to be done about the high costs and something needs to be done about the non-use of properties and sites. What these measures should look like is the tricky part.

If you had ever worked in the building industry you would realise that it is extremely competitive and margins are very tight. At least for the contractors

Greyian

godtabh wrote: »

You dont need to draw a wage from it if you are working full time which I would say is the majority of 1 house landlords.

Presumably at some point they'll want to get money from the company, at which stage they will be paying income tax on it.

In the meantime, they would also be paying corporation tax on profits gained (which would be quite likely, seeing as they aren't drawing any wage from it).

handlemaster

godtabh wrote: »

You dont need to draw a wage from it if you are working full time which I would say is the majority of 1 house landlords.

It will be all taxed either way as company rate then taxed again in wages . No point in doing this. The expenses can be offset regardless . I dont get the no wages thing .... The point of investing is to make a return. If you think a landlord can wait 25 yrs to have the property paid off thats just foolish.

Alkers

Maybe set up the company to receive the rent and pay the mortgage then the company can always sell you the house for 1e when the mortgage is paid off?

Effects

subpar wrote: »

Small landlords are treated in the tax system as a business, but yet get very few of the tax treatments of a business for example

They are taxed on gross rental income

---

not profit

Really? I always thought that expenses were taken away from the taxable amount. Just like a business.

They can also write off 75% off the mortgage interest.

They are not even allowed to write off a single hour of the time they work on renting / servicing / cleaning / repairing or sourcing fixtures or fittings for the rental property.

Yeah, same as a business. When I make improvements to my work studio I can't write that off. If I spend time repairing a piece of work equipment I can't write that off.

athtrasna

Can we get back to property market please and leave the tax talk to the taxation forum. Thanks

Mod

godtabh

handlemaster wrote: »

It will be all taxed either way as company rate then taxed again in wages . No point in doing this. The expenses can be offset regardless . I dont get the no wages thing .... The point of investing is to make a return. If you think a landlord can wait 25 yrs to have the property paid off thats just foolish.

A single property landlord isnt going to make anything (or very unlikely to make anything) until its sold. In the mean time its about minimizing costs

The Student

There appear to be a number of reasons why the housing market is the way it is. The main reason is lack of adequate supply. We appear to have a fixation with three bed semi's. There are a multitude of 3 bed semi's already out. How many empty nesters are out there. Converting existing three bed semi's into flats would be very easy. You solve two issues at the same time. The empty nesters can remain in their family home (albeit a bit smaller) in surroundings they now and feel safe in and you bring onto the market two bed flats in areas which already have the required infrastructure and connection to various services etc.

A typical three bed semi could easily accomadate a one bed flat on the ground floor with a simple extension out the back and a two bed upstairs. All you would need is to convert the attic and you then have a double bedroom in the attic the existing box room and convert one of the existing bedrooms into a sitting room and the other as the kitchen.

I understand recent studies have shown the average size of the family is actually falling.

The Student

There appear to be a number of reasons why the housing market is the way it is. The main reason is lack of adequate supply. We appear to have a fixation with three bed semi's. There are a multitude of 3 bed semi's already out there. How many empty nesters are out there. Converting existing three bed semi's into flats would be very easy. You solve two issues at the same time. The empty nesters can remain in their family home (albeit a bit smaller) in surroundings they know and feel safe in and you bring onto the market two bed flats in areas which already have the required infrastructure and connection to various services etc.

A typical three bed semi could easily accomadate a one bed flat on the ground floor with a simple extension out the back and a two bed upstairs. All you would need is to convert the attic and you then have a double bedroom in the attic the existing box room and convert one of the existing bedrooms into a sitting room and the other as the kitchen.

I understand recent studies have shown the average size of the family is actually falling.

Sleepy

I found it interesting in that Newstalk piece that Tom Parlon was touting 15% as the expected margin on a build. That seems a fairly high return on investment to me so surely there's some room for maneouver there.

How far have wages fallen in the Construction Industry? Are semi-skilled workers still expecting professional salaries?

A special VAT rate for construction of residential homes would seem to make as much sense as the special rate the hoteliers are getting...

Focusing on apartment building is a mistake IMO. The market wants 3 bedroom family homes so lets build solid 3 bed semis / terraces with standard fit-outs rather than ****ty apartments / town houses / duplexes done to a "high spec" i.e. tarted up as cheaply as possible. Apartments are for young urban professionals in city centre locations, not for families trying to raise children and no matter what standard or size they're built to, you're not going to convince the average Irish house buyer otherwise, particularly when for most of us, our only experience of apartments are the disasters that were build during the celtic tiger: cramped, poorly insulated ****-boxes in complexes with high management fees, no storage space and tripping over your bike on the way to bed because the underground car park is either flooded or a magnet for thieves.

That said, the height restrictions within the city centre are a nonsense, as is our tolerance of what should be prime real estate being used for social housing ghettos.

Michael D Not Higgins

Sleepy wrote: »

I found it interesting in that Newstalk piece that Tom Parlon was touting 15% as the expected margin on a build. That seems a fairly high return on investment to me so surely there's some room for maneouver there.

Yes, that was where I heard it. When I heard 15% I thought they must still be using their template spreadsheets from the early 2000s.

El_Dangeroso

The Student wrote: »

There appear to be a number of reasons why the housing market is the way it is. The main reason is lack of adequate supply. We appear to have a fixation with three bed semi's. There are a multitude of 3 bed semi's already out. How many empty nesters are out there. Converting existing three bed semi's into flats would be very easy. You solve two issues at the same time. The empty nesters can remain in their family home (albeit a bit smaller) in surroundings they now and feel safe in and you bring onto the market two bed flats in areas which already have the required infrastructure and connection to various services etc.

A typical three bed semi could easily accomadate a one bed flat on the ground floor with a simple extension out the back and a two bed upstairs. All you would need is to convert the attic and you then have a double bedroom in the attic the existing box room and convert one of the existing bedrooms into a sitting room and the other as the kitchen.

I understand recent studies have shown the average size of the family is actually falling.

Have you ever lived in a house converted into flats? I have and would never again. It's a like a more expensive house-share. There's no way to adequately sound proof floors between flats and thats before you get into things like shared electricity and water bills.

RandomAccess

I think I missed the memo where the three bed semi was declared ostentatious.

The high density developments now have three story terraces aka townhouses. They have no boundary demarcation at the front and since there's no driveway or side return they are either cluttered with ugly bins or tied into a management company.

Management company are a swindle if you are in a building without indoor common areas, lifts or automatic gates. It's no surprise that people who have lived in apartments, even modern apartments, are eager to have more control over their own property.

The property eco system is ailing.

Cuddlesworth

Sleepy wrote: »

I found it interesting in that Newstalk piece that Tom Parlon was touting 15% as the expected margin on a build. That seems a fairly high return on investment to me so surely there's some room for maneouver there.

15% per year or for the build.

Michael D Not Higgins

Cuddlesworth wrote: »

15% per year or for the build.

For the build, he was totting up the costs and said 15% was the developer's margin. He was also complaining about the high cost of the sites compared to the sale price.

Cuddlesworth

Michael D Not Higgins wrote: »

For the build, he was totting up the costs and said 15% was the developer's margin. He was also complaining about the high cost of the sites compared to the sale price.

If you considered the size of the build, the time from start to completion, the risk associated with the volatile housing market, its not actually a great return on investment.

If you consider that 10%(I think) of any new build has to be free social housing and that wages in the building industry may have fallen from stupid heights but are still at the very least 150% of minimum wage, there is some fat that could be trimmed elsewhere.

But the reality is, you can build most houses for around 200k but the minimum build price in Dublin is approching 350k. There are rough calculators for this and large builds do have economy of scale in their favour. The issue is and will always be land cost. This house is 200k of materials and labour and at least 400k of land cost. It's not a Irish problem, its not a new problem.

Michael D Not Higgins

Cuddlesworth wrote: »

If you considered the size of the build, the time from start to completion, the risk associated with the volatile housing market, its not actually a great return on investment.

If you consider that 10%(I think) of any new build has to be free social housing and that wages in the building industry may have fallen from stupid heights but are still at the very least 150% of minimum wage, there is some fat that could be trimmed elsewhere.

But the reality is, you can build most houses for around 200k but the minimum build price in Dublin is approching 350k. There are rough calculators for this and large builds do have economy of scale in their favour. The issue is and will always be land cost. This house is 200k of materials and labour and at least 400k of land cost. It's not a Irish problem, its not a new problem.

No developer is giving the social housing away for free, they are compensated (just not at open market rates).

Tom Parlon said on Newstalk the base building costs including wages wouldn't come down due to inflation. His suggestion was reducing the levies and tax on new builds. In other words, he wants the government to take all the hit instead of the builders themselves.

Uriel.

Michael D Not Higgins wrote: »

No developer is giving the social housing away for free, they are compensated (just not at open market rates).

Tom Parlon said on Newstalk the base building costs including wages wouldn't come down due to inflation. His suggestion was reducing the levies and tax on new builds. In other words, he wants the government to take all the hit instead of the builders themselves.

Of course he would considering he represents that industry.

Cuddlesworth

Michael D Not Higgins wrote: »

No developer is giving the social housing away for free, they are compensated (just not at open market rates).

Tom Parlon said on Newstalk the base building costs including wages wouldn't come down due to inflation. His suggestion was reducing the levies and tax on new builds. In other words, he wants the government to take all the hit instead of the builders themselves.

I could be wrong but I was always of the understanding that the developer was liable for the cost. For example, you are required to pay them if you don't want to meet the requirement and apply for exemption. Or transfer equivalent assets or land of the completed houses.

"Planning and Development Acts 2000-2002

Part V (part 5) of the Planning and Development Acts 2000-2002 allows Dublin City Council to ensure developers set aside up to 20% of a new development (of 5 or more homes) for social and affordable housing.

There are several ways in which this obligation can be met:

Transfer a portion of the site that is being developed to us.
Transfer completed homes to us.
Transfer of fully or partially serviced sites on the site to us.
Transfer land at another location to us.
Transfer of completed homes at another location to us.
Transfer serviced sites at another location to us.
Pay us a sum of money instead of transferring a physical asset.
The way in which you meet your obligations can be agreed with us at the meeting described above."

There was 136 million in payments alone from 2002 to 2011. In 2000, social housing was effectively hoisted onto private purchasers and added a significant cost, primarily to FTB'ers I'd assume.

But I still say the most significant cost is land. Houses now have to be built on postage size stamps of land, no parking and are still at least twice their build cost.

OfflerCrocGod

Is this net or gross? If it's net it's an amazing return. House building is a commoditized industry so 15% in an era of where safe assets are yielding zero or in many cases below zero is excellent.

Michael D Not Higgins

Cuddlesworth wrote: »

I could be wrong but I was always of the understanding that the developer was liable for the cost. For example, you are required to pay them if you don't want to meet the requirement and apply for exemption. Or transfer equivalent assets or land of the completed houses.

The developer has to list the costs with 'reasonable' profit which is then paid to them for their percentage of the development. The payments could be made instead, which is what was done during the bubble since the profit on the open market was so much higher than the cost of paying off their obligation under Part V. They're now trying to remove that provision so it must be complied with by providing housing.

This is another reason the social housing stock has dwindled over the last 10 years.

Michael D Not Higgins

Uriel. wrote: »

Of course he would considering he represents that industry.

I know, and I know he's trying to start from a better bargaining position for any future discussions with the government on housing costs, but a flat out unwillingness to budge on their own margin or costs is really my point.

sapper

This market is dead dead dead.

Only 8 second hand houses in the 450-650k bracket have come up for sale to myhome in the last 4 weeks in all of Dublin West.

handlemaster

I was thinking at also the market looks very stagnant. .. Nothing much coming on

gaius c

Michael D Not Higgins wrote: »

That would only make sense if longer lets were becoming the norm which, granted, could have some effect, e.g. people happy where they are and not moving especially when there's a crisis ongoing.

However, a drop of nearly 80% in daft's rental supply stats is not significantly due to longer lets. It's clear those 14,000 odd properties went somewhere and the obvious answer is on landlords selling up, increased demand and no additional supply.

The main blockage I see is the lack of supply. There is certainly a case to be made that people are sitting on empty properties to realise a better return as the market rises and an empty site tax should be encouraged in these instances. I know in London some new apartment blocks are empty because foreign billionaires buy them up as investment vehicles.

The builders then say the costs are too high which I think is probably them looking at it from their 2006 hats on comparing it to the building costs and sale prices then. There's a few things that have to happen, builders need to be more realistic about their margins, something needs to be done about the high costs and something needs to be done about the non-use of properties and sites. What these measures should look like is the tricky part.

No I don't think those things are clear at all.
You're confusing currently available stock with total stock.

We don't have data on total stock that I know of and we certainly don't have data to make conclusions such as "landlords selling up". That's a mantra getting repeated ad nauseum by landlords themselves as part of their beal bocht agenda and it doesn't really have any evidence to support it.

As pointed out, builders' margins are fairly tight. It's the lads higher up the food chain who are the problem.

gaius c

sapper wrote: »

This market is dead dead dead.

Only 8 second hand houses in the 450-650k bracket have come up for sale to myhome in the last 4 weeks in all of Dublin West.

Have you tried searching below 450k?

gaius c

Sleepy wrote: »

I found it interesting in that Newstalk piece that Tom Parlon was touting 15% as the expected margin on a build. That seems a fairly high return on investment to me so surely there's some room for maneouver there.

How far have wages fallen in the Construction Industry? Are semi-skilled workers still expecting professional salaries?

A special VAT rate for construction of residential homes would seem to make as much sense as the special rate the hoteliers are getting...

Focusing on apartment building is a mistake IMO. The market wants 3 bedroom family homes so lets build solid 3 bed semis / terraces with standard fit-outs rather than ****ty apartments / town houses / duplexes done to a "high spec" i.e. tarted up as cheaply as possible. Apartments are for young urban professionals in city centre locations, not for families trying to raise children and no matter what standard or size they're built to, you're not going to convince the average Irish house buyer otherwise, particularly when for most of us, our only experience of apartments are the disasters that were build during the celtic tiger: cramped, poorly insulated ****-boxes in complexes with high management fees, no storage space and tripping over your bike on the way to bed because the underground car park is either flooded or a magnet for thieves.

That said, the height restrictions within the city centre are a nonsense, as is our tolerance of what should be prime real estate being used for social housing ghettos.

And is he talking 15% margin factoring in the price that his dopey CIF member paid for the site back in 2006?

Developers are flailing around desperately trying to avoid crystalising losses (now that the market has stopped rising again) and if they can find a sucker to bail them out, they'll take them.

This is why the developers should have been liquidated and the sites sold in a firesale. We are being held to ransom because of LTEV codology.

Sono

sapper wrote: »

This market is dead dead dead.

Only 8 second hand houses in the 450-650k bracket have come up for sale to myhome in the last 4 weeks in all of Dublin West.

Yeah, it's really quiet out there since before xmas, very little coming onto the market at all.

PhoenixParker

If landlords are selling up in droves as is claimed where is the corresponding increase in properties for sale?

MAJJ

Sono wrote: »

Yeah, it's really quiet out there since before xmas, very little coming onto the market at all.

Same in Ballinteer / Dundrum so little available for anyone trading up. Finally, traded up recently so know focusing on builders!

El_Dangeroso

PhoenixParker wrote: »

If landlords are selling up in droves as is claimed where is the corresponding increase in properties for sale?

It's bizarre, lowest ever vacant rental stock and nothing on the market, where the hell are all the houses?

OfflerCrocGod

El_Dangeroso wrote: »

It's bizarre, lowest ever vacant rental stock and nothing on the market, where the hell are all the houses?

Central bank killed the market saying they will review the rules later this year? If that's the case the whole year is a write off.

RandomAccess

El_Dangeroso wrote: »

It's bizarre, lowest ever vacant rental stock and nothing on the market, where the hell are all the houses?

Eh.. being rented out I guess?

slowjoe17

El_Dangeroso wrote: »

It's bizarre, lowest ever vacant rental stock and nothing on the market, where the hell are all the houses?

When there is little to no building, what would you expect?

Apparently Apple warned the government that lack of housing is forcing them to reduce hiring: http://uk.businessinsider.com/a-lack-of-housing-could-affect-the-expansion-of-apples-irish-empire-2016-2

This will get worse before it gets better.

brownbeard

gaius c wrote: »

We are being held to ransom because of LTEV codology.

Gaius c, forgive my ignorance but could you explain the LTEV acronym?

I Am The Law

OfflerCrocGod wrote: »

Central bank killed the market saying they will review the rules later this year? If that's the case the whole year is a write off.

I don't see why that is? If property owners put their houses up for sale at realistic prices I'm sure it would be a very busy year. Lower prices means it's easier to save for a deposit and easier to get a mortgage relative to peoples income.

Michael D Not Higgins

brownbeard wrote: »

Gaius c, forgive my ignorance but could you explain the LTEV acronym?

I had to look it up too, it's long term economic value, something Nama took into account for the property they bought up. In other words, waiting for the price to rise.

gaius c

PhoenixParker wrote: »

If landlords are selling up in droves as is claimed where is the corresponding increase in properties for sale?

And that's what we call a headshot!

gaius c

Michael D Not Higgins wrote: »

I had to look it up too, it's long term economic value, something Nama took into account for the property they bought up. In other words, waiting for the price to rise.

It's the voodoo economic idea that an asset is worth something other than what somebody will pay for it now.

Think of it buying 2 litres of milk for €1.50 but the supermarket deciding that milk is actually worth €2 for a 2 litre bottle and they keep 95% of their milk stock in the freezer in order to create a shortage on the supermarket shelf and in the resulting panic, consumers have no option but to buy the milk at €2.

There's loads of milk but the amount that is readily available on the shelf is very limited. That's the key strategy behind coercing debt free people to stump up and bail out the indebted.

There's no actual shortage of housing stock, even in Dublin where they have double the number of empties that other developed cities do. What is bottlenecking the market is the extremely low transaction rate.

And when people can't buy, they have to rent and the Irish rental market was never that well developed to start with.

Michael D Not Higgins

gaius c wrote: »

It's the voodoo economic idea that an asset is worth something other than what somebody will pay for it now.

Think of it buying 2 litres of milk for €1.50 but the supermarket deciding that milk is actually worth €2 for a 2 litre bottle and they keep 95% of their milk stock in the freezer in order to create a shortage on the supermarket shelf and in the resulting panic, consumers have no option but to buy the milk at €2.

There's loads of milk but the amount that is readily available on the shelf is very limited. That's the key strategy behind coercing debt free people to stump up and bail out the indebted.

There's no actual shortage of housing stock, even in Dublin where they have double the number of empties that other developed cities do. What is bottlenecking the market is the extremely low transaction rate.

And when people can't buy, they have to rent and the Irish rental market was never that well developed to start with.

So basically what De Beers do with diamonds then, gotcha.