FG to abolish stamp duty for first time buyers!

"Can anyone see where this is going?

'bubble' and 'burst' spring to mind... "

I've been hearing this for years. It's not going to happen. At least not in the next 10/20 years IMO.

"I think you underestimate the greed of developers in this country."

I don't think I do. I believe they are a rapacious bunch of thieving vipers (to mix a few metaphors).

I believe they are already charging exactly what they judge the top level of affordability to be. They haven't a charitable bone in their bodies.

The consequence of the imposition of stamp duty at x% in such circumstances is that developers will have to cut prices by x% also.

Only the developers lose. The taxpayer wins. It's a zero sum game so the buyer is ultimately unaffected.

That's because I believe the house market, for all its perceived faults, tends to be efficient if you just keep out the distortions (such as stamp duty on some classes of houses but not others and differing rates of duty in different price bands).

"I believe they are a rapacious bunch of thieving vipers (to mix a few metaphors)"

We're in agreement then

I see your point oysterman. Perhaps you're right. I'm not convinced though. We'd have to see what would happen in reality.

Let's take this as an example though.
Two apartments in area X.
The first one is second hand and valued at 300k.
The second one is being built and being sold for 300k.

If you're a FTB and want to buy the first apartment you'll be paying 300k + 3.75% (11,250).
If you want to buy the second one you'd pay 300k only.

Let's say both apartments are the same, in the same area etc...just one was built last year.
If we introduced stamp duty for new properties, why would the developer reduce the price of the second (new) property by 11,250??? It wouldn't make sense.

Nice example but I fear it's constructed on a false premise.

New properties have a price premium built in. Any estate agent will tell you that in a flat market a purchaser of a (stamp duty free) new property will be unable to get back the purchase price if they sell it immediately - in effect the property instantly loses the value of the stamp duty that would be needed to buy it on the secondhand market.

Another way of looking at this scenario is simply that developers are getting to pocket what should have been the stamp duty had the new property been liable for it.

The amount of money the market values that proerty at is the same in either case i.e. €Y if new (no sd) or €(Y - x%) + x% stamp duty the day after its original purchase.

In your example: if the secondhand flat can be sold at €300k + €11,250, the developer (assuming his flat is identical) will simply price it at €311,250 because buyers won't see any distinction between the two "prices".

As I said, the developer will simply get to pocket what should have been the stamp duty.

"Any estate agent will tell you that in a flat market a purchaser of a (stamp duty free) new property will be unable to get back the purchase price if they sell it immediately - in effect the property instantly loses the value of the stamp duty that would be needed to buy it on the secondhand market."

Again, I understand what you're saying. I don't know if this is true or not but I'll take your word for it, as you seem more knowledgable about it.
However, the fact is, if you buy a new house/apartment (let's say from plans) and sell straight away (upon completion), the value of the property will have increased...at least in today's market.
Obviously, that's just one example.

I suppose if you bought a newly built property on tuesday and tried to sell it on thursday then what you're saying may happen. I don't know for sure.

Maybe someone should abolish FG!

Maybe someone should abolish FG!

You're exactly right, Piggy.

The rising market of the last decade has conspired to obscure the truth of the point I'm trying to make. Quick purchase/resales have been profitable but only because of the rise in the market.

As for your gracious point about me seeming to be knowledgable.....you've been around AAM long enough to know the fallacy of confusing conviction with knowledge.

The truth is that I have been hopping the ball to a certain extent here. I have no more love for stamp duty than the next person (having handed over roughly 18 months worth of net salary in stamp duty on the purchase of a modest family house at the end of last year). But I do feel really strongly that if we're going to have it at all, it should be at a uniform rate on all properties to minimize distortions in the market.

Keep the faith!

I agree with what you are saying oysterman. I suppose it can be summed up as the market decides what the price is; the question is how much should go to the developer and how much should go to the exchequer.
I disagree that stamp duty should be imposed at a flat rate as the system we have now puts some downward pressure on prices as people try to keep out of the higher brackets.
It also takes more from those who have more. Which, I think, is the way it should be.
On the point about making a quick buck, the transaction costs and CGT negate any gains in price in the short to medium term.

..

Surely were you to abolish the stamp duty for all FTBs you will just cause an increase blip in the secondhand homes, which are even now rising faster than new homes. I agree about not getting back the value of a new home instantly. Its obvious you are willing to pay more for a new house to avoid stamp duty...

Bubble

Sorry if I hear someone say that the costs of housing is a big bubble that will explode one more time......I will take out a Fatwa on them.

Housing, property and land is segmented they are not one Bubble. When the housing market collapsed in the UK back in the late 80's and early 90's most locations suffered bar one - London.
Buying in Dublin is rock solid safe as long as your location stand up, but if you are on the outskirts paying Dublin prices be warned, by the way 300K for a house in Dublin? I saw two bedroom new houses on the Malahide / Feltrim Road go for €225 last month.


By the way Oysterman “Stamp duty is neither the cause of, nor the solution to, high house prices. But the current system simply puts money into the hands of the developers of new houses that could otherwise have gone to the state (i.e. to you and me).”

You are looking at the snapshot here, FTB on purchasing new houses spend a large proportion of their purchase price directly and indirectly to the revenue, VAT inclusive in the building materials, PAYE on employers wages, construction company profit return, all goods and materials for furnishings, services and rates charges plus VAT on legal outlay and so forth. In addition, they are upgrading their position into consumer land, which is off course policed by VAT. Therefore, it is grossly in accurate to state that they are not applicable to pay a contribution to the state tax return.
Adding a stamp duty would curb the uptake in housing and would only reduce the above returns.

Re: Bubble

that could otherwise have gone to the state (i.e. to you and me).

Click to expand...

You might want to rethink your belief that just because money is collected in tax in benefits you and me. It doesn't necessarily follow.

-Rd

Re.Re: Bubble

You might want to rethink your belief that just because money is collected in tax in benefits you and me. It doesn't necessarily follow.

Click to expand...

You cynic!