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 …

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Bad incentives created the housing crisis

This is a fascinating video that clearly points out some of the myths surrounding the housing bubble in the USA, describing the role that Federal Reserve policy played in creating the bubble, they created a set of incentives which were badly aligned with long term aims. We have long felt that the role of monetary policy and regulation have been central to the problems in both the US and Europe, the full video of the conference is below.

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