Robert Shortt from RTE’s Primetime show spoke to us about the Central Bank idea of putting caps on lending in terms of the loan to value and the loan to income ratios. There is a sense in this, but we don’t believe such a crude instrument is nuanced enough to negate the downsides that such a policy brings with it. There are better ways to do this and they should be explored.
Pat Kenny spoke to us about the report from the ESRI which indicated that many people were now getting out of negative equity due to rising prices.
This needs to be tempered by a realisation that on every commodity that there are winners and losers, the losers are just not as clearly framed as the winners and this was a point we tried to make.
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 …
We were asked to speak to John Keogh on Jonathan Healy’s show (he’s covering while Jonathan is on paternity leave), to discuss the issue of rising rents.
We tried to emphasis several pertinent points, firstly is that prices are where they were in 2003, second is that rising house prices are meant to be good (we are told) but rising rents are not, what people want is rising prices and dropping rents and that’s not realistic.
Lastly is that the most impressive rent increases were not made by private landlords, they were made by the state and local authorities who have pushed up rents 80% while private rents are static over 10 years! Hopefully some of the true data makes it through to the public domain.
Mary Wilson spoke to Karl Deeter about some of the housing issues being faced by the country on RTE’s Drivetime. The point was made that lowering cost is a better idea than ramping up credit.
We were pleased to contribute to RTE’s flagship current affairs show ‘Primetime’ when they looked at the Irish property market. As students of history we are confident that we are going to go through another boom-bust in the 2020’s, as believers in the ability for change we are hopeful it won’t have to be this way, but there is little to give faith in that when you look at the current policy response.
We were asked to discuss some of the problems in the property market with Sean O’Rourke and Philip Farrell of Real Estate Alliance.
There are issues such as gazumping with other bidders, gazumping where there are no other bidders, under-pricing to increase interest and timed viewings which create an ‘auction type environment’.
It is incredibly difficult for estate agents to manoeuvre their way through this without upsetting somebody (and it can’t be the vendor who is their ultimate client). This is why we should consider some small rules where people get punished for anti-market behaviour such as the vendor having to pay a buyer a certain sum if they pull out after the contract is signed.
This isn’t going to stymie anybody, remember, it is only after the booking deposit is paid, accepted, and the contract sent out, signed and returned that this could happen.
An unintended consequence may mean that contracts don’t get sent out very easily in the future, but can we believe that people would avoid getting contracts sent out? That’s unlikely, some kind of structural change …
I had a chat over coffee with a friend and we were discussing how the Economist was showing that ‘young home owners’ are a dying breed. It is also a fact that older people tend to have less debt and own more property, then we got to talking about how you could balance the scales.
My idea (which I don’t agree with, it was just to ‘throw it out there’) was that your tax rate should be your age. It could work on homes via imputed rents – very unlikely to see the light of day, but on investment property it would make a big difference and would mean that profits of the most profitably landlords would reduce over time as they age.
It might encourage them to sell or transfer property to younger generations (releasing CAT/CGT tax in the meantime), it could also all backfire, was just a thought and probably an ill thought out one at that.
Hugh Linehan of the Irish times had TD for Galway West Derek Nolan, Fintan MacNamara from the Residential Landlords Association and Karl from this parish.
The conversation was a fascinating one because it isn’t too often that you get to have an extended conversation with people who are involved in politics and the property business without it devolving into argument. Hugh Linehan did an excellent job of facilitating this format and we are looking forward to hearing more on the topic, kudos to the Irish Times for a job well done.