Is Pat Rabbitte safe as Labour leader?

[madisona]

Can you check your workings please? I make it that under the old regime, any non-FTB (including investor) would pay just under €23k on a €700k property, and under the proposed Labour policy, they would pay €33k. Where did you get your figures from?

I don't think that you erred at all. It clear from the policy document that speculators buying multiple properties would gain most financially from Labours stamp duty tax cuts. e.g a speculator buying three houses at €700,000 each would save an extra €69,000

For the record, the truth of Labour's stamp duty policies can be [broken link removed]. The proposal was to eliminate stamp duty for FTBs up to €450k and reduce stamp duty for ALL other purchases, with the highest percentage reductions aimed at purchasers around the 400k mark.

all I did was take the figures from the Labour policy document that you had earlier provided.

"For (a non FTB ) purchasing a house worth €700,000, duty will fall from €63,000 under the current regime to €40,000 – a saving of €23,000. For a (non FTB purchasing) a €300,000 apartment, stamp duty will fall by €5,000."​

 

[madisona]

Way off the mark, for many reasons.

1) Purchases are not limited to new houses, so your rants about developers prices are misguided. Market pricing will apply, and 'begin to buy' purchasers will operate in the market along with other purchasers.
2) In parallel with this scheme, Labour committed to meeting the NESF target of 10,000 social housing units, which will take significant demand out of the market at the lower end.3) The cost of the scheme is minimal - the 'interest only' cost of the funds invested, given that the state retains a share in the property. In fact, if there continues to be a modest rise in property prices, the scheme will be self-financing.
4) The local authority can take a view on the value (or otherwise) of the purchase price and can refuse to pay exorbitant prices
5) There is excess capacity available in the market on the supply side, as we are currently building about 20,000 less units this year over last year. This will prevent any inflationary effect.

.

it may be more accurate to say that the money would have been paid over to "property sellers" although the majority of these property sellers would have been developers

quite extraordinary that you are claiming that the cost of the scheme would have been minimal . before the election Pat Rabitte said that it would have cost €2.5 billion.

"Given the political importance of the issue, the Government is likely to attack Labour's plan on the grounds that it will accelerate prices and do nothing to increase the availability of houses.
The €2.5 billion fund would be created from exchequer funds, but it would not come from any existing State fund, such as the National Pension Reserve Fund. "It would be exchequer money," Mr Gilmore told The Irish Times."

[broken link removed]



To say that paying such enourmous amounts of money to house sellers would not distort the market and have a inflationary effect on house prices is not credible. I would argue that FTBs are already allowed to borrow too much with lax control of salary multiples and 100% 40 yr IO mortgages and that many who have bought are already under increasing financial pressure from interest rate hikes and such unforseen events as having kids. To continue to allow them to do so but only for a part of a property is a crazy idea.

To imply that a "modest" rise in house prices would allow FTBs to "release equity" and buy out the govts share is not credible. The only way that it would be self financing is if the govt was able to get FTBs to pay it the extra money that it was giving to property sellers on top of the maximum amount that they could borrow. IMO as FTBs are already stretched to the max this would not have happened.

A sensible policy would have sought to reduce prices for FTBs . To propose to instead do the exact opposite was imo a terrible proposed misuse of taxpayer money.

 

[madisona]

Was this before or after Cowen jumped on the bandwagon and offered larger tax cuts than Labour and no cap on stamp duty exemption for FTBs? The words pot, kettle & black spring to mind.

I am not an apologist for Fianna Fail or Biffo. my criticisms of Labour were due to the fact that they were proposing right wing policies and that Labour had in the past been a party of the left. However a few points. Bertie panicked before the Ard Fheis and joined Labour in engaging in auction politics, by which I mean making unrealistic promises about tax cuts and spending increases. However unlike Labour, FF had been in power for 10 yrs at that stage. most sensible people dismissed their promises as electioneering and trusted them to disregard them once the election was over. On the other hand, Labour have not been in power and many were not sure whether they were just lying or whether they would follow through and bankrupt the country ( as Fianna Fail did after engaging in similar auction politics in 77)

On the issue of FTB stamp duty Biffo did a U turn . imo he did so for two main reasons.

1 It was part of the deal that he did with the Sindo. (in addition to exclusives and access to Bertie )

2 Biffo was infuriated that Labour (and FG) was saying that its tax cuts were to benefit FTBs. his protestations, that very few FTBs paid any stamp duty, and that most of Labours tax cuts would benefit non FTBs, fell on deaf ears. So under pressure, he gave in and abolished stamp duty for all FTBs . As so few FTBs paid any, the cost was minimal ( far below what Labours cuts would have costed) He had to abolish it for all FTBs, as to set a limit, no matter how high would have meant that the opposition parties could still say " Stamp duty is hurting first time buyers"

 

[RainyDay]

it may be more accurate to say that the money would have been paid over to "property sellers" although the majority of these property sellers would have been developers

quite extraordinary that you are claiming that the cost of the scheme would have been minimal . before the election Pat Rabitte said that it would have cost €2.5 billion.

"Given the political importance of the issue, the Government is likely to attack Labour's plan on the grounds that it will accelerate prices and do nothing to increase the availability of houses.
The €2.5 billion fund would be created from exchequer funds, but it would not come from any existing State fund, such as the National Pension Reserve Fund. "It would be exchequer money," Mr Gilmore told The Irish Times."

[broken link removed]



To say that paying such enourmous amounts of money to house sellers would not distort the market and have a inflationary effect on house prices is not credible. I would argue that FTBs are already allowed to borrow too much with lax control of salary multiples and 100% 40 yr IO mortgages and that many who have bought are already under increasing financial pressure from interest rate hikes and such unforseen events as having kids. To continue to allow them to do so but only for a part of a property is a crazy idea.

To imply that a "modest" rise in house prices would allow FTBs to "release equity" and buy out the govts share is not credible. The only way that it would be self financing is if the govt was able to get FTBs to pay it the extra money that it was giving to property sellers on top of the maximum amount that they could borrow. IMO as FTBs are already stretched to the max this would not have happened.

A sensible policy would have sought to reduce prices for FTBs . To propose to instead do the exact opposite was imo a terrible proposed misuse of taxpayer money.

Thanks for clarifying your source of figures for non-FTBs. Thanks also for clarifying your fundamental lack of understanding of the scheme. The €2.5 billion fund is not the cost of the scheme. For the €2.5 billion that could have been spent on the scheme, the state would have recieved €2.5 billion in residential property. This would of course have been purchased back from the state (at current market values) over time, replenishing the fund. It is really just a matter of moving money around - it is not a real cost.

There is of course a risk if property were to fall in value, but given your certaintly that the scheme would have an inflationary effect, I'm sure you're not going to play that card. I'd love to know that basis of your claim that most such investments would go to developers, and not private sellers - where did you get this from?

I am not an apologist for Fianna Fail or Biffo. my criticisms of Labour were due to the fact that they were proposing right wing policies and that Labour had in the past been a party of the left. However a few points. Bertie panicked before the Ard Fheis and joined Labour in engaging in auction politics, by which I mean making unrealistic promises about tax cuts and spending increases. However unlike Labour, FF had been in power for 10 yrs at that stage. most sensible people dismissed their promises as electioneering and trusted them to disregard them once the election was over. On the other hand, Labour have not been in power and many were not sure whether they were just lying or whether they would follow through and bankrupt the country ( as Fianna Fail did after engaging in similar auction politics in 77)

Most analysts seem to agree that all parties cancelled each other out with auction politics, and the key deciding factor that tilted the balance back to FF in the final week of the campaign was nervousness about the economy.

Note that if you really do believe that your left-ish policies have a future - get involved. Join your local Labour branch, or even your local SF or SP branch. Try putting your policies into effect on the ground. It's a tad more tricky that policies via bulletin boards.

 

[madisona]

Thanks also for clarifying your fundamental lack of understanding of the scheme. The €2.5 billion fund is not the cost of the scheme. For the €2.5 billion that could have been spent on the scheme, the state would have recieved €2.5 billion in residential property. This would of course have been purchased back from the state (at current market values) over time, replenishing the fund. It is really just a matter of moving money around - it is not a real cost.

There is of course a risk if property were to fall in value, but given your certaintly that the scheme would have an inflationary effect, I'm sure you're not going to play that card. I'd love to know that basis of your claim that most such investments would go to developers, and not private sellers - where did you get this from?

I understand how Labour said that the scheme was supposed to work. It was proposed to be a mere redistribution of wealth, or moving money money around as you put it. Labour acting as the anti Robin Hood would give €2.5 billion to wealthy property sellers from exchequer funds and would then collect that money from impoverished FTBs, so there would be minimal cost to the state. However I don't think that there is a hope in hell that it could have worked out like that.

The first part would be easy. Transfer €2.5 billion from the exchequer to property sellers. Getting it back from FTBs however would be much more problematic. (btw I see no contradiction between Labours pumping that amount of money into the market and falling property prices. It would have an inflationary effect but not enough of one. As a former "Current Sentiment" bear I see negative equity as an almost inevitable reality for any FTBs buying in the short term.)

The state would not have €2.5 billion in stand alone property. It would have shares in overpriced shoeboxes occupied by FTBs. These FTBs would have already mortgaged themselves to the hilt on 40 yr mortgages to buy their "share". The govt money would be on top of the very maximum amount that they could borrow. There may be a few that will win the lottery or get big promotions but for many others the reality will be at best standing still, at worst losing their jobs and having to work for less, getting sick or having children, so I doubt that very many will be in a position to buy out the govts share. Of course Labour could try evicting them and their children, selling the property and giving them a share and so bring back a tradition first started by famine landlords.


In relation to how much property Ftbs buy from developers and how much from other sellers I don't have figures to hand but a lot of FTBs like to buy new builds, although I accept that in the past they were incentivised to buy such rather than second hand houses as a way of supporting the construction industry. However I don't think it particularly matters. I don't think that private sellers should be subsidised in this manner either.

I also feel that Fianna Fail has its own version of a house seller assistance fund ready to go. I expect to see the Dept of the Enviroment and local councils coming to the aid of selected hard up speculators, flippers and developers who are unable to get the price they "deserve" on the open market in the coming months.
e.g http://www.independent.ie/national-news/state-steps-in-for-homes-purchase-1037474.html




btw as an admirer of Joe Higgins, I did try the Socialist Party but found them a bit too much like a religous cult, except with less connection to reality and pragmatism. bulletin boards are the last refuge of a cynic.