BUDGET'05 - Stamp duty abolished

PH01

Stamp duty abolished for first time-buyers of second hand houses worth up to €317,000

Hot off the presses from his Budget speech, Brian Cowan delivers for first-time buyers.
This has gotta to be a vote winner?

TheLedge

definitely.

me, being a first time buyer, I swore I was voting FG in the next election unless it was abolished. This is great news for me considering i'll be buying a house in the next 12 months, probably!

leahcim

This is great news.

I hope the estate agents will not just increase the price of houses so they can absorbe this gain to the benefit themselves and their clients.

doh.ie

leahcim wrote:

This is great news.

I hope the estate agents will not just increase the price of houses so they can absorbe this gain to the benefit themselves and their clients.

Wouldn't surprise me if they did. The first-time buyer's grant was certainly absorbed into the cost of houses before it was abolished.

DapperGent

D'oh about a year too late for me.

It really was a nasty silly tax. Fúcking horribly expensive too.

therecklessone

A good move, and one that will bear fruit for first-time buyers in the next year or so with plenty of ex-rental properties coming on the market methinks.

Any sign of them removing stamp duty on mortgages over €254,000 at all?

FX Meister

I heard this but without the first time buyers part and I was about to jump for joy as I've just bought a place but haven't paid for it yet. It will definitely increase the price of second hand homes though as there will be a higher demand.

Waylander

It is not totally abolished, only on houses with a value under E317,500. Even if you pay 320,000 you will have a full liability wiht no discount. So it is not great news for people buying in Dublin, but it is a step in the right direction.

therecklessone

Waylander wrote:

It is not totally abolished, only on houses with a value under E317,500. Even if you pay 320,000 you will have a full liability wiht no discount. So it is not great news for people buying in Dublin, but it is a step in the right direction.

www.rte.ie

First time buyers of second-hand houses worth up to €317,500 will be exempt from stamp duty, with reduced rates for higher priced houses.

DapperGent

Any chance they'll enact this retrospectively?

I'd like my thousands back.

giftgrub

DapperGent wrote:

Any chance they'll enact this retrospectively?

I'd like my thousands back.

rte news said it comes into effect from tomorrow

it breaks down like this

First time buyers of a €200,000 second hand house will save €6,000 while those buying a €250,000 house will save €7,500.

People paying €308,000, the average price of a Dublin House, will save €11,550.

gurramok

giftgrub wrote:

rte news said it comes into effect from tomorrow

it breaks down like this

First time buyers of a €200,000 second hand house will save €6,000 while those buying a €250,000 house will save €7,500.

People paying €308,000, the average price of a Dublin House, will save €11,550.

Its only a small step.

Owner occupiers still have to pay normal stamp duty if they want to move to 2nd hand homes. This group still have to buy new houses in order to move as to avoid stamp duty.

Examples of these are the elderly(your parents) who still cannot afford to move to smaller homes(kids grown up) without going to the few new ones which are too highly priced in dublin anyway.

Ex-rental properties will only come on the market if the owners move on.
This budget has done nothing to free up properties for buyers, it has made the few 2nd hand homes available to the many 1st time buyers.

FX Meister

Sorry gurramok, if I'm understanding you correctly then you are wrong. If you are already an owner occupier and you move home, even if you buy a new house you still have to pay the stamp duty.

gurramok

FX Meister wrote:

Sorry gurramok, if I'm understanding you correctly then you are wrong. If you are already an owner occupier and you move home, even if you buy a new house you still have to pay the stamp duty.

Not on new homes under 125sq metres which probably comprises majority of homes.
Stamp duty applies over 127,000 value for 2nd hand house for owner occupier which is now scrapped for 1st time buyer only(with new limit to over 300 grand).

For OOc', advantage is clearly to move to new house rather than to 2nd hand home for owner occupiers hence squeeze on demand for new homes which has happened.

FX Meister

Are you sure about that? I'm almost certain that you are wrong. I've just bought my second house, I bought a second hand house as I would have had to pay stamp duty on a new one, and it was under 125 Sq.M. As far as I know the exemption of stamp duty for a house under 125 Sq.M only applies to a first time buyer of a new home. Non owner occupiers of new and second hand homes have to pay stamp duty and the same rate of stamp duty is paid by investors and non first time owner occupiers. Maybe some one else can shed some light on this?

gurramok

FX Meister wrote:

Are you sure about that? I'm almost certain that you are wrong. I've just bought my second house, I bought a second hand house as I would have had to pay stamp duty on a new one, and it was under 125 Sq.M. As far as I know the exemption of stamp duty for a house under 125 Sq.M only applies to a first time buyer of a new home. Non owner occupiers of new and second hand homes have to pay stamp duty and the same rate of stamp duty is paid by investors and non first time owner occupiers. Maybe some one else can shed some light on this?

From myhome.ie stamp duty

FX Meister

Sorry, had a rethink but I'm still not completely convinced your right but I'm doubting myself a bit. I'll call my solicitor in the morning and see what he has to say. Reading this:Houses/Apartments less than 125 sq. metres
For persons buying new homes/apartments, there is a full exemption from stamp duty for first-time buyers and owner-occupiers (but not investors) provided the structure has a floor area certificate issued by the Department of the Environment. I am presuming it is the same as the old system and it means you must be a first time buyer as well as an owner-occupier.

Zaph0d

TheLedge wrote:

me, being a first time buyer, I swore I was voting FG in the next election unless it was abolished. This is great news for me considering i'll be buying a house in the next 12 months, probably!

You'll have an extra 6-9K to spend on your house but then so will everyone else. You can put the extra 6-9K in with your deposit and approach your bank and they may well offer you a larger loan - but that's what everyone else will do. I'd guess that house prices in this sector will have risen by more than the old stamp duty rates within 30 days.

The politicians on both sides know that this change in stamp duty will cause house prices to rise and transfer revenue previously gained for the state to builders and landowners. They've chosen to do it anyway because it will be popular. Bringing in a property tax for investors would have depressed demand for property and lowered prices but they didn't have the balls.

Victor

Zaph0d wrote:

You'll have an extra 6-9K to spend on your house but then so will everyone else.

But that "everyone else" will exclude investors and trader-uppers.

FX Meister

But the price won't have chaged for the investors and trader-uppers, so if they were interested before they still will be. Only difference is more competition for the same house, pushing the price up.

Zaph0d

Victor wrote:

But that "everyone else" will exclude investors and trader-uppers.

True, but trader uppers will benefit from being able to sell their second hand houses stamp-duty free to FTBs. Investors will lose out. Cowen has estimated that reduction in stamp duty will cost €60m. This is €60m more for consumers to spend on houses. This measure does not increase the supply of houses just the demand so it can only result in increased prices.

FX Meister

gurramok wrote:

From myhome.ie stamp duty

Just confirmed it with my solicitor and it only applies to first time buyers and not other owner occupiers. Looks like people wanting to trade up are still in the same boat as they were before. It can be hard to understand the way they word it like on myhome.ie and oasis.gov. I had to call the rev commisioners a couple of months ago and even the info they told me over the phone was completely wrong.

Sleepy

From my understanding, by abolishing this tax for first time buyers on homes under the 317K limit, and offering reduced stamp duty for these first time buyers up to about 600k, this measure gives first time buyers a much needed edge over trade-uppers and investors. True it doesn't do anything to increase supply, but the best means of doing that would be to impose harsher laws on landlord-tennant agreements (perhaps a rent freeze?).

Victor

Sleepy wrote:

perhaps a rent freeze?

Apparently unconstitutional.

Zaph0d

Sleepy wrote:

True it doesn't do anything to increase supply, but the best means of doing that would be to impose harsher laws on landlord-tennant agreements (perhaps a rent freeze?).

Yes, this would dissuade investors from residential property and would likely lead to a drop in house prices and a rise in rents. A tax on property investing would have the same effect.

Collecting the existing taxes from property investors would be a good place to start. (Yesterday's Irish Times stated that less than a fifth of landlords had registered with the government Private Residential Tenancies Board.)

Rent control seems like such an obviously good idea but it has been abandoned by so many cities that brought it in after the 2nd world war.
Advantages

• Rents are frozen at an affordable level by govt
• Poorer people can afford housing

Disadvantages

• Demand still exceeds supply, so some people cannot get a place to live. How do you decide who those people are going to be. In the past it was those who couldn't afford it but now who's it going to be?
• A black market emerges whereby people sell on transfer rights to rent-controlled apartments to others or hand them to their friends.
• Black market subletting occurs at true market prices.
• Surveys show that rents paid, above and below board, in rent-controlled cities are often higher than in non-rent controlled cities
• Landlords find that their rent-controlled properties are in so much demand that they have no need to invest money in their maintenance
• Allocation scandals often emerge (Paris and NYC) where rent controlled apts are allocated by government to wealthy political friends.
• Rent control usually only covers certain areas of the city. Prices in the other areas increase as a result.
• No developer wants to build new housing because the rent controls make it uneconomic.
• Discriminates against young people. Once you get a rent comtrolled apartment you know you're onto a good thing so you sit on it for years.
• Discriminates against immigrants to the city.

Third world govts have traditionally fought inflation by capping prices. Every so often we try it too. Remember the attempt to fix the price of a pint?

The Corinthian

I think this zombie thread should be made into a sticky...

UnknownSpecies

Why? Genuine question

The Corinthian

As a reminder of our hubris thanks to the benefit of hindsight.

That we warmly welcomed a policy that ultimately fuelled a disastrous bubble.

That those in it complaining that they had bought a year or two earlier, and thus had to pay stamp duty, ironically ended up better off than those who bought later, at higher prices, and didn't.

That despite it clearly being a bubble at that stage (I remember considering buying in 2004 and came to this conclusion) we still kept on buying into it.

It's a snapshot, dredged from the archives of Boards, that gives us a glimpse into how we thought at the time and so part of us wants to reply to the thread screaming "DON'T DO IT!" - but it's too late.

And maybe it may act as a warning against false certainties and confidence in the future lest our or future generations do the same.

Kinski

The Corinthian wrote: »

As a reminder of our hubris thanks to the benefit of hindsight.

That we warmly welcomed a policy that ultimately fuelled a disastrous bubble.

That those in it complaining that they had bought a year or two earlier, and thus had to pay stamp duty, ironically ended up better off than those who bought later, at higher prices, and didn't.

That despite it clearly being a bubble at that stage (I remember considering buying in 2004 and came to this conclusion) we still kept on buying into it.

We? Who exactly?

It's a snapshot, dredged from the archives of Boards, that gives us a glimpse into how we thought at the time and so part of us wants to reply to the thread screaming "DON'T DO IT!" - but it's too late.

And maybe it may act as a warning against false certainties and confidence in the future lest our or future generations do the same.

You may be asking a little too much of an old message board thread (with a whopping 25 posts in it.)

Tragedy

The Corinthian wrote: »

As a reminder of our hubris thanks to the benefit of hindsight.

That we warmly welcomed a policy that ultimately fuelled a disastrous bubble.

That those in it complaining that they had bought a year or two earlier, and thus had to pay stamp duty, ironically ended up better off than those who bought later, at higher prices, and didn't.

That despite it clearly being a bubble at that stage (I remember considering buying in 2004 and came to this conclusion) we still kept on buying into it.

It's a snapshot, dredged from the archives of Boards, that gives us a glimpse into how we thought at the time and so part of us wants to reply to the thread screaming "DON'T DO IT!" - but it's too late.

And maybe it may act as a warning against false certainties and confidence in the future lest our or future generations do the same.

The bubble wasn't 'ultimately' fueled by abolishing stamp duty in 2004, the bubble was well on its way at that stage.

The best example of hubris in this thread is your post, to be honest.

The Corinthian

Kinski wrote: »

We? Who exactly?

Us. The Irish. Those who witnessed that period and remember the many slurred pub anecdotal conversations in pubs about people who were 'flipping' investment properties or considering buying in countries that we didn't know existed a few months earlier - "if you're not in, you can't win".

You may be asking a little too much of an old message board thread (with a whopping 25 posts in it.)

I did say snapshot.

Tragedy wrote: »

The bubble wasn't 'ultimately' fueled by abolishing stamp duty in 2004, the bubble was well on its way at that stage.

It did ultimately fuel it; certainly it did not create it or even was its greatest cause, but it certainly further exasperate it in its final two or so years.

The best example of hubris in this thread is your post, to be honest.

Really? I'm not sure you know what hubris means then.

Fair enough, it and I have rubbed people up the wrong way, it seems. Best it's closed off then.

Dannyboy83

I thought it was a good bump.

I think these little artefacts are valuable and not just historically speaking... it depends how people choose to interpret it.

Kinski

The Corinthian wrote: »

Us. The Irish. Those who witnessed that period and remember the many slurred pub anecdotal conversations in pubs about people who were 'flipping' investment properties or considering buying in countries that we didn't know existed a few months earlier - "if you're not in, you can't win".

I didn't buy any property, or even contemplate it. I'm certainly no expert on investments, but I took notice when publications like The Economist warned that Irish property prices were overdue a massive correction. It didn't take any special knowledge to see we couldn't all get rich by selling houses to each other. We were not all in this together.

But you're right in one sense - some people do need to be reminded of what they were saying at the time.

The Corinthian

Kinski wrote: »

I didn't buy any property, or even contemplate it. I'm certainly no expert on investments, but I took notice when publications like The Economist warned that Irish property prices were overdue a massive correction. It didn't take any special knowledge to see we couldn't all get rich by selling houses to each other. We were not all in this together.

As I said already I didn't buy either but largely because the average salary to price ratio was getting insanely out of whack and that stank of bubble to me, as did some of the mortgage deals that were appearing (100%, and in some cases higher, mortgages). I remember reading what you mentioned in the Economist too, but this was a year later in 2005.

However, while not all of us jumped onto the bandwagon, we did live through this period and witness such discussion and ultimately whether we bought or not we have all been affected one way or another by the bubble's collapse.

But you're right in one sense - some people do need to be reminded of what they were saying at the time.

Yes and no. The lesson behind the mentality of that period goes beyond just that period. While I saw that bubble, and the dotcom bubble too, for what it was, I didn't elsewhere and jumped onto the bandwagon of the Eircom flotation; and subsequently took a bath on it - so we all end up rolling snake-eyes from time to time and take the loss like grown-ups (one would hope).

In all cases the popular mood was unrealistically optimistic and pretty easy to spot if we bothered to examine this optimism with objective and cynical eyes.

So if there is a lesson here it's probably got nothing to do with property, but with whatever bubble we're almost certainly going to encounter in the future.

spank_inferno

Great bump.

Back 5 years ago we foolishly purchased a 2 bed house.
Conveniently it cost...... €317,000.
The only cheaper property in the town was €315,000.

Now the property is worth (at best) €120k.

I was a fool.... a foolish handsome fool!

Tragedy

The Corinthian wrote: »

It did ultimately fuel it; certainly it did not create it or even was its greatest cause, but it certainly further exasperate it in its final two or so years.

That we warmly welcomed a policy that ultimately fuelled a disastrous bubble.

You phrased it as if the bubble didn't exist before stamp duty was abolished. Also, there is zero logic behind thinking abolishing stamp duty = fueling a property bubble. If a buyer had 285k to spend including stamp duty, and the next day had 285k to spend with no stamp duty to pay - he was still paying (and more importantly - borrowing) 285k.

Really? I'm not sure you know what hubris means then.

Fair enough, it and I have rubbed people up the wrong way, it seems. Best it's closed off then.

I would suggest I know the meaning of hubris better than you based on this thread, considering both your poor wording and your terrible example of hubris.

YMMV though, and do continue to attempt to be (absurdly) profound.

The Corinthian

Tragedy wrote: »

You phrased it as if the bubble didn't exist before stamp duty was abolished.

That wasn't my meaning, but fair enough if my wording confused you.

Also, there is zero logic behind thinking abolishing stamp duty = fueling a property bubble. If a buyer had 285k to spend including stamp duty, and the next day had 285k to spend with no stamp duty to pay - he was still paying (and more importantly - borrowing) 285k.

Yes, but the money that would have had to be set aside on stamp duty now got to push the price up instead, unless you hadn't thought of that.

I would suggest I know the meaning of hubris better than you based on this thread, considering both your poor wording and your terrible example of hubris.

You can suggest all you want, but until you demonstrate it that's all you're doing. And so far you've only demonstrated that my English confused you, you can't do math and that you can misuse the word 'hubris'.

RichieC

This is cruel!!

Lapin

V
> ? <
^

gurramok

spank_inferno wrote: »

Great bump.

Back 5 years ago we foolishly purchased a 2 bed house.
Conveniently it cost...... €317,000.
The only cheaper property in the town was €315,000.

Now the property is worth (at best) €120k.

I was a fool.... a foolish handsome fool!

Yeh, it was a big con alright. Minimum prices in Dublin(for example) for new and 2nd hand houses shot up overnight to 317k after the abolishment of FTB stamp duty. It was serious bubble territory, the buyer was conned.

RATM

Good bump.

Brian Cowen put into effect the policy that made the boom boomier and the bust catastrophic. And 41% of Irish people repaid them in 2007 by re-electing them. Our 'leaders' really don't know the meaning of leadership, only populism for garnering votes.

djpbarry

Tragedy wrote: »

The bubble wasn't 'ultimately' fueled by abolishing stamp duty in 2004, the bubble was well on its way at that stage.

But 2004 was several years before the stuff really hit the fan. There was plenty of scope for damage limitation at the very least.

Denerick

RATM wrote: »

Good bump.

Brian Cowen put into effect the policy that made the boom boomier and the bust catastrophic. And 41% of Irish people repaid them in 2007 by re-electing them. Our 'leaders' really don't know the meaning of leadership, only populism for garnering votes.

Will people stop blaming our leaders? I don't recall even one voice of protest against this policy at the time, probably the most popular ever undertaken by an elected government. People have such short memories. All these 'Captain Hindsights' running around, but REFUSING to blame themselves! Its making me horrendously misanthropic. I hope the recession increases in intensity and the Irish people get the misery they/we all deserve.

RATM

Denerick wrote: »

Will people stop blaming our leaders? I don't recall even one voice of protest against this policy at the time, probably the most popular ever undertaken by an elected government. People have such short memories. All these 'Captain Hindsights' running around, but REFUSING to blame themselves! Its making me horrendously misanthropic. I hope the recession increases in intensity and the Irish people get the misery they/we all deserve.

My point was that 59% of people didn't vote for Fianna Fail in 2007 but look at what we got in the end. I remember leading up to that election telling anyone who would listen not to vote for them but I was ignored. The 2002 election was virtually identical in the numbers they delivered back to the Dail. They were a populist party back in the 1970's when the abolished rates and reducing stamp duty was just another extension of that - a vote winner. Those of us who analysed the situation knew what they were up to - buying votes- it had been seen and done many times before by FF. Who else is to blame if not the 'leaders'? Our form of democracy is such that when they get elected they can pretty much do as they please and we are powerless to stop it, 'we have a mandate....'

I wouldn't call myself a Captain Hindsight but Foresight. I knew how to value property by rental yield as far back as 2001 as I lived with an estate agent who taught me the (basic) formula. From 2004 onwards I knew things were seriously wrong and despite pressure from family I resisted the urge to buy a €350,000 apartment in 2005 and a €470,000 one in 2007.

There are many others who were in the same situation as myself, they knew things were amiss. But when we raised our voices we were treated like madmen, according to the majority the party was never ending.

Kinski

Denerick wrote: »

Will people stop blaming our leaders? I don't recall even one voice of protest against this policy at the time, probably the most popular ever undertaken by an elected government.

Maybe "our leaders" should have shown some leadership by taking unpopular decisions back then rather than patting themselves on the back for taking them now when they have little choice anyway. Very blameworthy, if you ask me.

djpbarry

RATM wrote: »

My point was that 59% of people didn't vote for Fianna Fail in 2007...

No, 59% of people did not give FF their first preference.

RATM wrote: »

Our form of democracy is such that when they get elected they can pretty much do as they please and we are powerless to stop it...

Utter nonsense. The problem, as you allude to towards the end of your post, is that people wanted nothing other than a great big property orgy and they were not going to vote for anyone who proposed anything else. People get the government they deserve. Sure, there were sane, rational individuals in the country who could see full well it wasn’t going to last (in fact, I think the overwhelming majority of people knew this), but, that’s democracy.

RATM wrote: »

From 2004 onwards I knew things were seriously wrong...

Anyone who actually stopped to think for 2 seconds would have realised that the value of property could not possible continue to climb inexorably upwards, but people chose to take a punt and try to make a quick, easy buck.

Kinski wrote: »

Maybe "our leaders" should have shown some leadership by taking unpopular decisions back then[/I...

Sure, but of course any party proposing anything other than property madness prior to the 2002 and 2007 elections would have been decimated at the polls.

Denerick

Kinski wrote: »

Maybe "our leaders" should have shown some leadership by taking unpopular decisions back then rather than patting themselves on the back for taking them now when they have little choice anyway. Very blameworthy, if you ask me.

Your leaders wouldn't have got re-elected if they had taken unpopular spending decisions during an economic miracle (Which is what it was, to many who lived through the best years of it) This is the fundamental problem you don't recognise. If FF weren't populist they wouldn't have gotten re-elected. political parties exist in order to govern. In my opinion, this makes the voters equally if not more culpable than the political class.

An unvirtuous citizenry deserve every consequence of every bad policy undertaken by their bad government. Accept some responsibility and stop indulging in the fantasy of a few machiavellian schemers in Leinster house.

Kinski

Denerick wrote: »

Your leaders wouldn't have got re-elected if they had taken unpopular spending decisions during an economic miracle (Which is what it was, to many who lived through the best years of it) This is the fundamental problem you don't recognise. If FF weren't populist they wouldn't have gotten re-elected. political parties exist in order to govern. In my opinion, this makes the voters equally if not more culpable than the political class.

An unvirtuous citizenry deserve every consequence of every bad policy undertaken by their bad government. Accept some responsibility and stop indulging in the fantasy of a few machiavellian schemers in Leinster house.

I have nothing to accept responsibility for.

We were talking about the property bubble, and now you're talking about public spending - I'm arguing that the govt should have recognised the property bubble for what it was, conveyed that analysis to the electorate, and made the case that it was in our long-term interests to stop stoking the market and instead pursue policies which would help cool it.

Many people, particularly those of the younger generation, were horrified by the spirraling price of property, and could well have become very supportive of any party that wanted to ensure that houses were affordable. Indeed, the logic behind abolishing stamp duty for first-time buyers was that doing so would "ease the burden" on young people purchasing homes, even if the policy itself was stemmed from a mistaken confidence in sustainability of the market.

djpbarry

Kinski wrote: »

...I'm arguing that the govt should have recognised the property bubble for what it was, conveyed that analysis to the electorate...

And said government would have been promptly voted out of office.

Do you really think that the average member of the electorate didn't think that property prices were getting a little on the high side?

The Corinthian

Kinski wrote: »

Many people, particularly those of the younger generation, were horrified by the spirraling price of property, and could well have become very supportive of any party that wanted to ensure that houses were affordable.

I think the earlier part of this thread would indicate otherwise; it's why I bumped it in the first place.

To begin with ensuring that houses were affordable and managing the spiralling price of property are very separate aims. In the long term they may coincide, but in the shorter term, they would likely be at odds; deflating the bubble would have required making it less 'affordable' - specifically depressing demand.

Instead abolishing stamp duty further amplified the spiral which finally reached its end a few years later and was done because there was democratic demand for such policies:

TheLedge wrote: »

me, being a first time buyer, I swore I was voting FG in the next election unless it was abolished.

This was the vox populi of the time and unfortunately within a democratic society we cannot abdicate responsibility even if we voted for someone else, or didn't buy ourselves or whatever, as democracy is all about collective responsibility.

The Fianna Fail government was populist and incompetent. The developers and bankers were greedy and incompetent. But that does not mean that as a population, the 'ordinary' citizens were not also greedy, selectively blind and/or incompetent too.

Being reminded of what we were saying is important, because even if the next bubble is not related to property there will be a next bubble, and if we remember the sort of things we were saying in the last bubble, we may actually avoid the consequences of the next.

Einhard

Kinski wrote: »

Maybe "our leaders" should have shown some leadership by taking unpopular decisions back then rather than patting themselves on the back for taking them now when they have little choice anyway. Very blameworthy, if you ask me.

Maybe we should elect more responsible leaders?