Warnings on Capital Gain Tax Exemptions

Recent emails obtained under Freedom of Information by Pearse Doherty, Sinn Fein’s Finance spokesman, revealed concerns the Revenue Commission has regarding the Department of Finance’s capital gain tax exemptions introduced in last year’s bill.

 

Revenue has warned the Department of finance that it’s tax exemption measures could cause property fund to hoard and sit on its properties instead of selling them, restricting supply and causing difficulties in the housing market.

 

The five year capital gains tax exemption applied to funds that invest in property for capital gain. It was implemented to encourage these funds to purchase and develop more land to boost housing supply in the market. The tax exemption allows the funds to be avoid any tax charged on the profit made when selling an asset during a five year period.

 

The problem is that due to the tax exemption, property funds are less likely to sell their assets before the five year term ends even through there is a …

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Analyzing rental yields – what this means for investors and renters

An article was published by Fiona Reddan on the Irish Times early this morning examining and evaluating property investment options in and around Dublin today. The article uses the measure of rental yields, how much rental income a property generates as a percentage of its market value, to compare the worthiness of investment options.

 

The major finding in the article was a negative correlation between housing prices and rental yields, meaning that, in Ireland, higher priced properties generate lower investment yields on average. The worst places to invest includes areas such as Dublin 6, Dublin 4, and Dublin 14, where average sale prices are well above €500,000. The best places to invest includes Dublin 10 and Dublin 2, where the average market value of property is much lower. In Dublin 6 for example, the average sale price is €706,741, while rental yields are only 3.6%. On the other hand, in Dublin 10, the average sale price is €173,478, but the annual rental yield is 10.4%.

 

These …

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Moody’s bumps up ratings on Irish banks

Credit rating agency Moody’s has upgraded the long term debt and deposit ratings of Irish Banks: Bank of Ireland (BOI) and Allied Irish Banks (AIB). It also upgraded each bank’s baseline credit assessment by one level. Irakli Pipia, Vice President-Senior Credit Officer at AIB said “the rating upgrades reflect a range of positive factors, including further reduction in non-preforming loans, improved capital ratios and achievement of stable core profitability”.

 

From the end of 2015 to the end of 2016, BOI’s problem loan ratio fell from 11% to 7.9% and the  loan to deposit ratio fell from 112% to 108%, signalling improvements in asset quality and a better funding ratio. The bank’s BAC was upgraded from ba1 to baa3, the 10th tier of Moody’s rating scale.

 

Moody’s also bumped its baselines credit assessment of AIB by one tier from ba1 to ba2. It cites a reduction in the percentage of the bank’s problem loans from 18.6% last year to 14% at the end of 2016 and the bank’s more liquid position.

 

Various other ratings were also affected in …

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AIB returns to stock market

Finance minister Michael Noonan officially announced Tuesday night government plans to sell a 25% stake in AIB, returning part of the bank into private hands. This marks AIB’s dramatic return to the London Stock exchange since it was nationalized almost 7 years ago during the last financial crisis.

Currently 99.9% government owned, the sale of AIB shares will likely be the largest stock market listing of 2017. Analysts estimate that the sale of shares will raise more than €3 billion for the government, contributing to AIB’s slow and steady return of the €20.8 billion of bailout loans it received from 2009 to 2011.

AIB is Ireland’s biggest lender, and since it’s nationalization, has worked hard to renew its image, slashing the amount of bad loans from 29 billion to 8.6 billion. With that and already €6.8 billion of taxpayers’ money returned, AIB CEO Mr. Bernard Byrne hopes the upcoming sale of shares will continue the bank’s process of recovery and reaffirms investor confidence.

Although …

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Newstalk: Karl Deeter on the Pat Kenny show discussing pensions

The Pat Kenny Show on Newstalk had us on to talk about the future of pensions and to help people understand some of the looming issues in the retirement space.

It is a complex problem which is affected by everything from home-ownership to central bank interest rates. The main thing to take from it is that everybody who can start a pension, no matter how small, should do so. One of the biggest issues is the fact that people don’t even have one they can contribute to.

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Irish Examiner quotes Irish Mortgage Brokers on planning

The Irish Planning Institute held their national convention in Athlone and we were pleased to see one of our own as one of the opening speakers at it. The points raised about planning, housing, and the importance of household wealth were received well by the audience which was about 300 strong and made up of the key players in planning throughout Ireland.

Claire O’Sullivan of The Irish Examiner followed up with a good piece on the conference and quoted Karl Deeter extensively, the excerpts from the article are below.

The Government should consider removing the rights of people to object to proposed developments as it is hugely costly, causes delays, and is not necessary, the Irish Planning Institute’s annual conference heard.

A compliance manager with the Irish Mortgage Brokers Association, Karl Deeter, said instead there should be greater trust in the ability of planners and the local authority.

He said a “third party right to object” did not exist in many countries as the planning departments and local authority are expected to make the correct decision.

“The role …

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Paying off a mortgage early, how to do it according to the experts.

This is a video about paying off a mortgage early. This is generally a good idea, being debt free is a great landmark in a persons financial journey. The other thing that we often forget to focus on is that overpayments are a brand of ‘savings’, if we thought about this more than consumption there would be more personal wealth staying with people rather than their creditors!

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Irish rents vs yields for one bed apartments

Looking at the yields versus the monthly rents for one bedroom apartments in the all the Dublin regions for quarter four of 2015, it can be seen that the rents ranged from €888 for North County Dublin to €1,480 for Dublin 4, while yields ranged from 5.7% for Dublin 6 up to 10.5% for Dublin 10.

Dublin County was divided into 25 areas corresponding with the postal districts plus North, South & West Dublin and we were attempting to see what relationship exists if any between the amount of monthly rent paid and the yield generated for the owner.

The yield is the gross figure and can be directly related back to the price of the property by calculating the annual rent and multiplying this by the multiplier which is calculated by dividing 100 by the yield e.g. take the one bedroom apartment in Dublin 1 with a monthly rental of €1,141 multiply by 12 to give €13,692.

It has a yield of 8.7% which gives a multiplier of 100/8.7 = 11.49. This will then give a property price of …

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Why people will still invest in property in 2016

We plan to go through the maths soon of why the tax breaks that ended in 2014 were a bigger driver of a slow down in the market than the Central Bank rules, this aside, people will still invest in property.

The world of investment is relative, not absolute and for the €90 billion sitting in deposit earning 1% (at best) or less the implications are clear, you have to invest somewhere or get substandard returns which will eventually be eroded by inflation.

Along with a future of quantitative easing in Europe, the likelihood of a Dollar that will get stronger and a stock market that looks toppy to many, property will remain a focus for better or worse with many people who have money.

On the capital side you have a known shortage of property, that would lead some to believe there are significant capital gains to be had. On the dividend or yield side, you have strong rents which are still showing signs of rising.

Rents are certainly very strong versus the return on deposits even when you …

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Podcast: How to get cheap insurance with Darragh Farrell, episode 00003

In this podcast we briefly looked at how to get cheap insurance. The amount of people who overpay for insurance is high in our opinion, and while it’s great that some folks seem to want to do all they can to make insurance companies profitable, we don’t agree with that so we spoke about ways to chop your bill down while keeping the same cover.

Darragh Farrell has been with us for almost a decade and has been a financial advisor for far longer, he holds his QFA and is also the person who heads up our sister site yes.ie which is purely about financial services.

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