Priming the property pump

The issue with Irish property (in particular Dublin where demand is evident) is that the pump has been primed in many different ways, first we’ll look at ‘how’ and then we’ll look at the aftermath using a worked example.

First of all, here are some of the things that are driving the market…

1. Build up of buyers, be they first time buyers or REIT’s who are able to take up any available supply.2. ECB rates are low, yield searching is an issue, deposit rates are low as is the risk free rate by comparison.3. Tax policy is an issue, from 2014 the marginal rate applies meaning that in a few short years the tax has gone up by 105% on savings from 20% to 41%.4. Finally, there is the Capital Gains Tax waiver if you buy a property and hold it for 7 years.

So here’s a worked example of the massive give away this represents and why it is mobilising so much money into property. We’ll take an identical €200,000 make a comparison over 7yrs from 2014 and …

Read More

The nonsense of VAT reclaims for ending the black market

One of the property concessions in budget 2014 was the ‘home renovation incentive scheme’. This is intended to allow people to get the VAT back on construction work done where the spend is over €5,000 and below €30,000.

While this is viewed as a ‘construction stimulus’ it is in fact a ‘black market disrupter’ which will run from the 1st of January 2014 to the 31st of December 2015. The reclaim will be valued at between €675 and €4,050 and will be given in the two years following the year the work is done, you also must be LPT compliant in order to avail of it.

So think it through, you will pay a certain amount of VAT on top of a job (or more appropriately the builder will charge you that) and over the two years after it you get it back in two tranches.

We have to make a few assumptions here, the first is that the cost of VAT on top of work is a deterrent from purchasing a service like construction, as VAT is an end …

Read More

Taxing sites: Isn’t that what a site value tax would have done?

When I heard that Dublin City Council was considering a tax on undeveloped sites I nearly choked on my coffee. The introduction of the Local Property Tax was contentious, for many it was contentious not because we were being taxed but because of ‘how’ we were being taxed.

That’s because a sizeable group of people believed that a site value tax would be a better alternative. Our government promised this on page 15 of their programme for government where they stated that they would ‘consider, arising from the previous Government’s deal with the IMF, various options for a site valuation tax‘.

That the Local Property Tax isn’t even going to local authorities this year is a serious snub, but to then turn around and in the same year see a Council look for a separate and additional tax on sites only demonstrates that we are …

Read More