# Possible government actions to counteract increasing property prices?



## Glenbhoy (6 Apr 2006)

I have speculated on this before and am wondering what any of you property bears or bulls feel should have been done in the past, or could be done in the future to cool down the property market without causing the disastrous crash many on here are expecting  (this is not intended to be yet another negative property thread).  So here goes:
1. Stamp duty on non-ppr's should be increased, the present increment for investors is too small (in the sense that home owners pay virtually the same), surely this helps to make stamp duty an extremely regressive tax.
2. Tax designated area's should (in the main) be eliminated completely.
3. The percentage of interest deductible from rental income on an investment property should be gradually decreased - eg, next year allow 85%, the following year 75% etc, down to about 50% eventually.
4. Introduction of a property tax, say 1% on the value of non-ppr's.
5. Stricter enforceable controls by the central bank with regards to mortgage lending criteria (not overly keen on this interference myself, but...).

These are a but few musings of an ill-informed moaner, rip them to shreds


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## dam099 (6 Apr 2006)

Glenbhoy said:
			
		

> I have speculated on this before and am wondering what any of you property bears or bulls feel should have been done in the past, or could be done in the future to cool down the property market without causing the disastrous crash many on here are expecting (this is not intended to be yet another negative property thread). So here goes:
> 1. Stamp duty on non-ppr's should be increased, the present increment for investors is too small (in the sense that home owners pay virtually the same), surely this helps to make stamp duty an extremely regressive tax.
> 2. Tax designated area's should (in the main) be eliminated completely.
> 3. The percentage of interest deductible from rental income on an investment property should be gradually decreased - eg, next year allow 85%, the following year 75% etc, down to about 50% eventually.
> ...


 
Wasn't 3. kind of tried already (it was eliminated entirely) as a result of the first Bacon Report and ended up being a disaster as it reduced the supply of rental accomodation causing a shortage and rent increases. They ended up reversing it a few years later so I can't see it being tried again.


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## Carpenter (6 Apr 2006)

I don't own any property outside of my PPR but I have been looking at investing in an apartment as our own mortgage is down to a very manageable LTV.  As a potential investor (and someone who works in the construction industry) I have some difficulty with your proposal.  Your proposals hit the first time investor hard- he's already hit for stamp duty, VAT and substantial outlay in professional and legal fees before he earns a red cent from his "investment".  Most average investment properties with a monthly rental income of €1000 or less will not cover the mortgage- most investors are holding out for capital growth as property prices  continue to grow (in the short term anyway, who knows).  I certainly do think that Section 23 incentives and the like should be abolished and this is happening.  There is no room for such incentives in an already bouyant property market, Europe has put the brakes on that one.  Stamp duty is already a huge cash cow for the exchequer and I'd hate to think of them getting any more from this revenue stream.  As for the lending criteria of the credit institutions- is it really a good idea to interfere in this at all?  At the end of the day borrowers are solely resposible for the level of debt they undertake, personal responsibility is the name of the game here I think.  As for suggestions as to what could/ should be done- I've none I'm afraid but I'd be very interested to hear anyone else's views.


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## bearishbull (6 Apr 2006)

its too late now,even if measures were put in place people would just find money to continue buying,its mania out there.
i think first time buyers should be given a better deal anyway.any attempts to stop investors would probably push up rents and house prices further.
the problem boils down to supply which will eventually catch up.the governement should have implement the supplyside measures but their builder and land owner buddies wouldnt have been happy with that. why should someone get massive increase in his land value just because its rezoned?the councils are the only ones that can make this land more valueable and the people these councils represent should benefit from its status,pay the going rate before rezoning plus 50% through compulsory purchase if necessary and let councils/government develop sites themselves.measures to force development land to be built on should also be implemented but even with these measures i think we are building at a ferocious pace now and this supply with exceed demand eventually in next few years and then prices have to slow/fall.
i bet if a crash occured people who now say let the market decide will then be calling for government intervention and joe duffy will have thousands of callers for months "no one told me prices could go down joe!".


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## Glenbhoy (7 Apr 2006)

dam099 said:
			
		

> Wasn't 3. kind of tried already (it was eliminated entirely) as a result of the first Bacon Report and ended up being a disaster as it reduced the supply of rental accomodation causing a shortage and rent increases. They ended up reversing it a few years later so I can't see it being tried again.


Yeah back in 1999?, however I feel that with supply of rental homes being what it now is, investors will be faced with the choice of paying the extra tax or releasing the property.  Additionally, the incremental decreases in deductibility are quite small and signposted in advance so as not to cause a shock to anyone.
Carpenter, I appreciate your point, perhaps a better proposal is to limit interest deductibility (property only) to that asset against which it is incurred (AFAIK, this is not currently the case.  However I would'nt have that much sympathy for investors, if they are able to purchase an investment property, a little extra tax may not be too inequitable.
With regards to stamp duty, it is indeed punitive, not just for investors, but also for homeowners.  Perhaps an alternative would be to do away with stamp duty for PPR's, but instead bring in a tax on the previously sacro sanct capital gain on the PPR (not necessarily a large percentage).  In an aside, the stamp duty limits need serious reform, the biggest problem is the ridiculous situation which exists around the various limits, for example, a ftb pays 381,000 and incurs stamp duty of 11K, if forced to pay 1 euro extra he incurs stamp duty of 22k - that makes sense does'nt it 
With regards to restrictions on mortgage availability, I would also be loathe to do do annything here, we're all big boys and girls now (even the banks) and have to take responsibility for our own actions.


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## bearishbull (7 Apr 2006)

maybe capital gains on investment properties and development land should be much higher and drop stamp duty for PPR's. if people arent making as much  on capital gains they will have to rely on rental yield and some sanity may return to the market.


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## Glenbhoy (7 Apr 2006)

> maybe capital gains on investment properties and development land should be much higher and drop stamp duty for PPR's. if people arent making as much on capital gains they will have to rely on rental yield and some sanity may return to the market.


This was also tried although very half heartedly back in 1998/99 - back then it was announced that all gains on development land would be taxable at 20% until 2002, at which stage it would revert to 40% - that is obviously the case now then is'nt it


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## sonar (8 Apr 2006)

I'd like to see increased regulation of estate agents and the bidding process. The point where the "rubber meets the road" - the point at which these absurd prices are being set - is very susceptible to deceit. You could be bidding against the seller himself disguising his voice on the phone to the estate agent for all you know ! 

Also I'd like the freedom of information act extended to allow anyone to find out the actual sale price of a house. This information is freely available is other countries why is it being hidden in Ireland ?


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## RainyDay (8 Apr 2006)

sonar said:
			
		

> I'd like to see increased regulation of estate agents and the bidding process. The point where the "rubber meets the road" - the point at which these absurd prices are being set - is very susceptible to deceit. You could be bidding against the seller himself disguising his voice on the phone to the estate agent for all you know !


Any such proposal would need to restrict the buyers ability to walk away from the bids. This is a double-edged sword.


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