# Property investment pre 311214 CGT deadline



## Daddy (10 Sep 2014)

I'm thinking with interest rates on deposits so low and likely to remain so for a couple of years before the inevitable slow rise would it not be a good idea to purchase a property before 311214 instead of leaving cash on deposit.   I imagine if I invested say 150k cash in a second property I am thinking with say just a 5% increase over 7 years would leave me far better off in 7 years time if I wanted to sell the property - i.e hold for 7 years and pay no cgt on disposal.  I am aware of property taxes involved.  Anyone agree or disagree with me as i believe there is a smell of things picking up.  I would be purchasing in a vibrant rural town. At worst if I rented the property and it never went up in value in the 7 years it's probably still a safer bet than cash on deposit return wise.  Thoughts appreciated.


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## mandelbrot (10 Sep 2014)

The thing is that your capital is fully at risk, in the event that there's another (presently unenvisaged) property crash... as long as you're aware of and willing to accept the downside risk then you can decide whether the potential return justifies the risk.


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## Daddy (10 Sep 2014)

Thanks we are taking 150k property don't think can fall an awful lot even with another property crash.  Accept your point though.


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## Daddy (10 Sep 2014)

Should add that even if property reduced 20% over the 7 years that the rental income after all taxes might still make it a good move.


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## dereko1969 (11 Sep 2014)

Daddy said:


> I'm thinking with interest rates on deposits so low and likely to remain so for a couple of years before the inevitable slow rise would it not be a good idea to purchase a property before 311214 instead of leaving cash on deposit.   I imagine if I invested say 150k cash in a second property I am thinking with say just a 5% increase over 7 years would leave me far better off in 7 years time if I wanted to sell the property - i.e hold for 7 years and pay no cgt on disposal.  I am aware of property taxes involved.  Anyone agree or disagree with me as i believe there is a smell of things picking up.  I would be purchasing in a *vibrant rural town.* At worst if I rented the property and it never went up in value in the 7 years it's probably still a safer bet than cash on deposit return wise.  Thoughts appreciated.



Do these exist? I'm not doing down rural towns but by vibrant I'm taking you to mean one where people have a good standard of living, have a very high level of employment and there are no ghost estates there and everything about it is tickety-boo?

Is it Tir-na-Nóg?


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## Daddy (11 Sep 2014)

OK 'vibrant' may have been a bit over the top but 'Tir na nog' it's certainly not. 

Look there is a general feeling that things are picking up a bit - right.   Interest rates on deposits are crap - right.  The CGT incentive will disappear at 31st December - right.  Property prices are not much above crash levels in the area posssibly 10% higher than lows so if we have another crash I really don't think they can sink an awful lot.  Properties in the area that were up for sale for 2-3 years are now moving these past six months.   
I thought this thread may have provoked more response actually but I suppose it's early days.


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## T McGibney (11 Sep 2014)

Daddy said:


> The CGT incentive will disappear at 31st December - right.




Will it? It was supposed to disappear on 31 Dec 2013 but was extended.


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## dereko1969 (11 Sep 2014)

Yes things are picking up but my reading is that it's very much two-speed, Dublin and the rest.

The only place I'd invest in property outside Dublin would be in a University town and only then if the property was dirt cheap and had a cheap agent looking after it.


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## Daddy (11 Sep 2014)

It will disappear as Noonan has said on several occasions it will.  They will not want to lose out on CGT and i would imagine he probably regrets extending it for 2014.


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## Daddy (11 Sep 2014)

Agreed the property price pick up is two speed.  Rampant in Dublin etc and at a crawls pace elsewhere.  But my point is even it property prices over the 7 years were to go up other than Dublin 3% to 5% p.a  one would be sitting pretty after 7 years on selling up with no cgt versus getting hammered with DIRT every year.


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## cremeegg (11 Sep 2014)

Why property and not shares? Just curious.


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## Daddy (11 Sep 2014)

Shares fall and rise more often than property.   Shares have had a good run and granted with ECB quantitative easing will help.  Profits are taxable.  property won't be subject to cgt.  More restless nights guaranteed I would have thought on investing a sum of € 150k.  
Thinking of this on 9/11.


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## landlord (13 Sep 2014)

Daddy, I am shocked that there isn't a much greater positive response to this property incentive. I bought an investment property in Dublin for cash at the start of this year, without knowing anything about this incentive. The idea was to flip it, but when I found out about this property incentive it became a no brainer.....hold on it it for 7 years, sell it and save on 33% CGT. I have many rental properties and the rate at which rents are increasing, in the last year or so is staggering. I would of thought the best time to invest in anything is after a crash when most others are others scared to. As they say with risk comes reward!!!!


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## Daddy (13 Sep 2014)

Thanks.  Have to admit thought I would have had more input to my suggestion.  So yours is a positive.  Amazed though that you purchased not knowing about the incentive as any EA worth there salt would be promoting this.


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## landlord (13 Sep 2014)

My motivation when I purchased initially was a quick flip from a financially distressed seller and no estate agent was involved in the purchase.


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## moneybox (13 Sep 2014)

Daddy said:


> Amazed though that you purchased not knowing about the incentive as any EA worth there salt would be promoting this.


 

I bought an investment property over the summer in Cork City and I never knew about this CGT exemption until I read about it on here.   Estate agent never mentioned it at all.  With property also creeping up in Galway and Cork cities, it would definitely be worth my while to hold onto it.  A saving of 33% on CGT is definitely a no brainer and makes the investment very worthwhile.


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## Bronte (15 Sep 2014)

Daddy said:


> It will disappear as Noonan has said on several occasions it will. They will not want to lose out on CGT and i would imagine he probably regrets extending it for 2014.


 
I wouldn't agree with this.  Anything Noonan says you can take with a hefty grain of salt.  Look at all he said about LPT being tax deductable.  

My guess is that the CGT exemption will be extended, governments cannot but help themselves to interfere with the property market.


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## T McGibney (15 Sep 2014)

In the context of property investment, "no brainer" is an oxymoron.

It's worth noting that the 7 year exemption is a qualified one, and full exemption is only possible if the property is sold on the 7th anniversary of its acquisition.


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## Daddy (26 Sep 2014)

Bronte.   Just to let you know that Noonan again said yesterday the relief will end in Dec.  So that's it for sure.


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## Daddy (9 Oct 2014)

Time definitely running out  - a far safer bet of some return rather than leaving in cash -
more thoughts welcome please.


Budget to scrap Cap Gains Tax exemption 

Thursday, 9th October 2014 03.46pm 



Minister of Finance Michael Noonan has confirmed that he does not intend to extend the Capital Gains Tax (CGT) exemption any further.

"I use tax breaks to get a particular economic or social response in the short term but I will not have it bedded in as a permanent feature of the tax code," he said.

Following the property crash, the Government, in Budget 2012, introduced a relief to incentivize the public to once again buy property with the promise that if that property was held for more than 7 years then on sale the seller would not be subject to Capital Gains Tax (CGT) on any uplift in value.

The relief initially applied to any property bought between 7 December 2011 and the end of 2013. However this was extended, in Budget 2014, until 31 December 2014.

Aidan Byrne, Taxation Partner, Baker Tilly Ryan Glennon commented "As we know, the property market has been on a steady upturn in the last year, people are seeing the value of this relief more and in practice are utilizing the relief. Those who have not bought property since the 7 December 2011, but have the means to do so, should consider availing of this relief especially in conjunction with succession planning and potential dwelling house relief".

By way of example of how the relief applies: if the property was bought in January 2012 and sold in January 2022, the property would have been held for 10 years, so 7/10 of any gain will be relieved from CGT and 3/10 is taxable.


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## Delboy (9 Oct 2014)

With the the proposed new LTV limit of 80% etc, and a much needed increase in units to hit the market about 2 years from now......what are the chances of much of a 'profit' for any investors, especially those who have bought in the major cities in the past few months (with the large price increase we have seen).

Worth considering


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## llgon (14 Oct 2014)

*Budget 2015*

Didn't hear any mention of CGT exemption being extended in today's budget.  Definitely ending on 31/12/14?


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## Delboy (14 Oct 2014)

llgon said:


> Didn't hear any mention of CGT exemption being extended in today's budget.  Definitely ending on 31/12/14?



Yes


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## moneybox (15 Oct 2014)

As a result of yesterday's announcement I think they will be a rush to snap up a bargain before the end of the year.


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## Delboy (15 Oct 2014)

moneybox said:


> As a result of yesterday's announcement I think they will be a rush to snap up a bargain before the end of the year.



That + the potential 20% deposit requirement coming in on Jan 1.

But from the CGT perspective, if you haven't got your house picked out by now, it'll be be a tight squeeze to get all done before 31/12


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## moneybox (15 Oct 2014)

yeah it will be a tight squeeze if someone buys now or in the next couple of weeks especially if there is a delay in the legal searches.  I still feel that lots of people missed the boat on this one as there didn't seem to be huge awareness aroudn it.


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## Daddy (15 Oct 2014)

Hi Moneybox - that's why I started this thread on 10th September looking for opinions to my suggestion.
Have to say I am surprised by so few direct responses to the opening thread at the time.


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## moneybox (15 Oct 2014)

I purchased an investment property last summer at a very low price and I wasnt even made aware of the CGT exemption, I only read about it on here. I intend to renovate this property and even if prices do dip in the future I can't see myself losing out as I intend to do most of the work myself. I will definitely be holding on to it now for 7 years. Considering that bank interest rates are at such a dsmal level, I think its a great incentive for people and a saving of 33% on CGT is something not to be scoffed at. It is also great for people who may just want to rent out a house for 7 years and then sell it on. Of course one should very carefully consider the location of the intended house purchase so as to maximise the benefits of making a profit in the future.


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## Palerider (15 Oct 2014)

moneybox said:


> A saving of 33% on CGT is definitely a no brainer and makes the investment very worthwhile.



I remember when the expression no brainer was the mantra about everything imaginable.

You are assuming there will be a gain and that is a big assumption as there may not be in real terms when you factor in all costs of your investment choice, costs of ownership, taxes, vacancy periods, problems, repairs etc and the usual hassles. Investment property will not be as attractive as it has been this past 12/18 months for the following reasons.

*The zero % seven year CGT incentive dies 31.12.14, this has been a massive driver in times of low deposit interest rates and has brought people into residential property as an asset class when they may otherwise have stayed out, I've been to auctions and viewings and they stand out from the crowd, these are chasing yield and the elusive appreciation.

* Cash investors are either already in this market or are now a  small percentage of it.

* Yields are compressed especially in desirable areas where there has already been a massive uplift this past 12 months in prices being achieved, take a look at the property price register in these so called desirable areas, commuter belts, Cities etc 

* Challenges in getting a mortgage from January 2015 with new CB rules in place. 

My view is that there will be a glut of property for sale from year 5 onwards as those who became reluctant landlords and reluctant 2nd home owners try to get out and avail of the exemption IF they can.

For me property in Ireland right now is absolutely the wrong investment choice, in my view buy now and you will get burned, wait until Autumn next year for the market to settle and as I see it you might well grab yourself a bargain but I won't be looking to get into this market.


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## Liamjames (4 Nov 2014)

moneybox said:


> yeah it will be a tight squeeze if someone buys now or in the next couple of weeks especially if there is a delay in the legal searches. I still feel that lots of people missed the boat on this one as there didn't seem to be huge awareness aroudn it.


 
Hi Moneybox, 
I am considering buying an investment property in Cork. I have just returned to Ireland from abroad but am currently living in Dublin. The reason I am looking to buy in Cork is twofold

1) I am originally from Cork so have a far better knowledge of the area than anywhere else in Ireland
2) It seems alot of the properties in Dublin are simply out of my budget

I am seeing a large variation in the gross rental yields achieveable (albeit I have only done my research on daft with limited data) 

It seems in areas such as Maryborough, Rochestown and bishopstown gross yields are quite low (4-6.5%) but closer to the city centre there appears to be more value. How do you find the rental market in Cork? Is your property located near the city centre and is there good demand for rentals (hard for me to tell not having lived there in 6 years). 

What do you reckon is a good Gross Yield for city centre properties? 

Thanks


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## amadain (17 Nov 2014)

It's worth noting that the 7 year exemption is a qualified one, and full exemption is only possible if the property is sold on the 7th anniversary of its acquisition. 

Aidan Byrne, Taxation Partner, Baker Tilly Ryan Glennon commented "As we know, the property market has been on a steady upturn in the last year, people are seeing the value of this relief more and in practice are utilizing the relief. Those who have not bought property since the 7 December 2011, but have the means to do so, should consider availing of this relief especially in conjunction with succession planning and potential dwelling house relief".

By way of example of how the relief applies: if the property was bought in January 2012 and sold in January 2022, the property would have been held for 10 years, so 7/10 of any gain will be relieved from CGT and 3/10 is taxable. 

I agree with Palerider above - "My view is that there will be a glut of property for sale from year 5 onwards (2011 + 7years relief = from 2018 to 2021) as those who became reluctant landlords and reluctant 2nd home owners try to get out and avail of the exemption IF they can."


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## amadain (17 Nov 2014)

Roll on 2018 imho.


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