This month the property-watch focused on Central Bank reports that property prices had overshot from 12-26% depending on the model used. This counter to conventional wisdom, so we chatted about this and other topics with Claire Brock, Martin King and Angela Keegan.
The Nyberg report is all over the papers/radio/TV, it is (meant to be) blowing the lid open on the causes and participants in our great property crash, but I don’t know if there is much in the way of ‘new material’ in it, why?
Because in 2009 CentralBanking.com (a publishing house) published a book called ‘Towards a new framework for financial stability’, the authors were all central bankers, economists, regulators and a few practitioners; all said almost 60 authors took part.
In the very first chapter they outline the broad consensus on the causes of the crash, which they say are as follows:
1. A worldwide liquidity glut (too much money floating around) which drove a search for yield and encouraged leverage 2. Errors of monetary policy (rates being too low in early 2000’s) 3. Structural shifts in the financial system & certain innovations (ABS’s/MBS’s/CDO’s) 4. Non bank intermediation (sub-prime lenders) 5. Lower margins (eg: trackers!) 6. Reliance on interbank funding (Ireland Inc.) 7. Deficiencies in Regulation 8. Separation of jurisdiction between Central Banks and Regulators …
Of the main changes we could consider in the near future from a national taxation perspective, none holds the potential for positive outcomes to the same extent as Land Value Tax (LVT) or Site Value Tax (SVT). Below are several points looking at why this is the case:
1. It is widely agreed that we need to spread the tax base to reduce taxes on employment to be replaced by taxes on assets, and to create a less volatile tax base. This can be achieved with Site Value Tax. In terms of ‘fairness’, it is important to remember that only 50% of properties in the country have a mortgage on them, and for that reason there is also taxable capacity in the market for this, in conjunction with a reduction in income taxes.
2. The Site Value Tax currently included in the Four Year Financial Recovery Programme, is such a tax. It applies only to land zoned for development, or already developed.
3. Land is a fixed asset. A high proportion of its value is dependent on its area, its …
A recent report by Moody’s pointed out that increased negative equity will cause a rise in arrears. The commentary surrounding this (in Ireland) takes the view that correlation is not necessarily causation. That people in negative equity won’t automatically go into arrears unless they cannot pay, that negative equity of itself is only an issue if you lose your job or have to sell. This is a valid opinion but it ignores the operational aspect of a household in respect of the way that they react when financial difficulty occurs.
There are several hundred thousand households in negative equity, and about 35,000 in serious arrears, how many of those people would not be in arrears if they were not in negative equity? The answer is: how ever many would have sold their house as a solution.
The first thing many people do if they know they are going to be headed for a situation where they stand no chance of paying their mortgage is to put their home up for sale, in …
The recent liquidation sales have possibly started a new trend in the property market in Ireland, one whereby there is an increasing divide between the valuations in different types of property, we have long been saying that the only market worth considering is non-apartment second hand homes in cities, the liquidation sales have reinforced this belief.
While we may be part of Europe, when it comes to living spaces we believe that Irish people favour houses to apartments, we have not crossed that particular Rubicon just yet and unlike our European counterparts, there is still a wish to own the land under the dwelling, over time this may change, but with the exception of the bubble-times the overwhelming mortgage for a first time buyer was used to purchase a house and not an apartment.
The situation regarding the property market in Dublin (for instance) will likely be one where apartments are seen as a totally separate market, in the past many newly built apartments were not priced on a totally dissimilar basis to houses of comparable square footage in the …
It took a while to get inspired today, then I saw a book on the shelf I had read years ago called ‘Bill the Galactic Hero‘ which is an epic satire following Bill – a guy who gets his arms blown off and then the surgeons re-attach to left-arms. Anyway, he works on this ship/planet and it has a serious waste issue so he decides to ‘post’ people all around the galaxy (postage intergalactic-ally is virtually free) parcels of waste, thus eradicating the issue.
That is all it took to come up with ‘Property Recovery 2.0’, my plan will entail taking all of our waste and using it to create a landfill out into the sea for 500m off the coast in every desirable location, giving a new half kilometer of land. Then we cart in sand and in effect create new ‘Beach-front Property’, erecting a three metre wall around the old ‘coastline’ – to give the place an air of exclusivity of course!
This effectively separates the ‘old’ great …
I met up with Ronan Lyons (economist with Daft.ie) to talk about the ideas of property tax in Ireland, how it might be a fairer way to tax people than stamp duty, or indeed the abscence of property tax [because it rewards/doesn’t tax holding certain assets]. The discussion spread to other ideas in taxation, and eventually we made some predictions (I can already say they are bound to be wrong!) and then we took to the streets and asked Joe Public about their thoughts on the economy and whether or not they had any hope for the future.
If you want to watch the full conversation you can check out the playlist on youtube.
Ronan writes a very interesting blog, you can check it out at http://www.ronanlyons.com what I personally like best about Ronan (other than his affable good nature) is the unique take he has on many topics on Irish Propert (a subject I am very fond of), by utilising the daft database he is …