Invest in a more expensive house

clueless2019 said:
As in, can i leave work at 50years old and say im 'retiring' and proceed to take 25% of my pension pot without paying tax.
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Generally 55, unless retiring early on medical grounds. You just have to leave the employer that pension relates to.

clueless2019 said:
i came to this site as opposed to a financial advisor, as i was looking for general advise, not which equities to invest in. and i am genuinely looking for advice,
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You might find it more useful to complete a 'money makeover'. Go through you circumstances and your objectives, and you'll get a wider range of ideas. E.g. do you want to retire early, or pass wealth to children tax efficiently?
As it is, you've just asked s specific question about upsizing your PPR.
 
RedOnion said:
Generally 55, unless retiring early on medical grounds. You just have to leave the employer that pension relates to
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No, it’s generally 50.

For the self-employed, they need to be 60 to access RACs/PRSAs.

And for owner/directors there are more complex rules (age 60 unless shares sold etc).
 
Academic for most of us!

Although a point worth making is that if one leaves one’s job and has a decent size fund, it can often make sense to either leave it where it is or move it to a Buy-out-Bond rather than bringing it over into a new scheme.

That way you can access it at age 50 without having to leave the new job. Useful in an emergency or to clear down debt (e.g. €100k left on mortgage at 3% and €400k in a BOB at at 50 enabling easy access to 25%/€100k).
 
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NoRegretsCoyote said:
If you have a solid income, and have €200k sitting in the bank, and you really, really like living in a big house, then it might be a good use of your wealth.

Any gain isn't of course taxed, and stamp duty and estate agents' fees are low in Ireland if you ever want to downsize.

That said, houses depreciate, and can decline in value too.
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This is a prescient thread for my personal circumstances - would be good to get opinions...

First off realise how lucky we are and in some ways feel silly for asking the question but need direction/validation.

Married couple in our late 30's with 2 kids aged both aged <6. No mortgage on home worth 1M, 1.5M in cash savings and pension funds worth 450K with contributions maxed each year. Currently saving an additional circa 150K a year.

We aren't interested in any risk in terms of using savings on equities investments, we do that through our pension funds. No interest in the hassle of buying and renting out properties, our work lives are too busy. At the same time we realise having a lump sum sitting in the bank is pointless as there is no growth and we aren't getting any utility out of it.

For that reason we are considering keeping 500K in cash, selling PPR and buying a bigger PPR for circa 2M.

Reasons to do so:
Use the money on something we can get utility and joy from
Have a store of wealth (granted it can depreciate) that can be passed on
We can downsize when kids grow up & use the surplus to fund retirement
We can downsize if times become hard & use surplus to cover life expenses
We would still have a significant cash cushion for life's unexpected events

Reasons not to:
We realise our jobs and current wealth generating ability wont last forever - could we afford the upkeep of a larger house if we made significantly less (i.e. one of us chose not to work or both of us decided to slow down on our careers/lost our jobs.
Are we setting unrealistic expectations for ourselves and our kids, we don't want them to have a gilded lifestyle
Are we setting ourselves up to a run rate of a high cost of living that we will forever be a slave to?

Would like to hear reasons not to do this and reasons to do this. We are relatively young and would like to learn from experiences of others.
 
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Congratulations to both of you, you are high earners and clearly have worked very hard to build your wealth and careers, the question is really good and I can see your incentive.

I have prize bonds languishing, I'm already in property investment and am also sitting on a lump of cash, I am in my 50's and retired and I am now asking myself if I should trade up to a nicer home, I'm happy with our current house, location etc but want to get value as you do from your cash reserves, as I was hammered in the crash I am avoiding equities and high risk.

Your thinking makes sense to me, it will be some time before the children need a pot of your money for marriage, their own home etc so you have plenty of time for your careers to generate more cash.

I'm with you on your thinking, makes sense to me .....go for it.
 
@Investadvice

€1m buys an extremely nice house for a family of four absolutely anywhere in Ireland.

€2m would buy you a nicer house of course. But at that point it's just positional and I doubt it would give you 2x utility. LPT on a €2m house is also €300 a month.

Obviously you have money burning a hole in your pocket. But prices are very volatile at the top end and it can be very tricky to sell when the market takes a turn.
 
Based on what I am seeing, there is major value to be had in that €1m plus space due to Brexit amongst other things.
 
clueless2019 said:
T
i think equities and land purchase are quite linked so i dont think there is a need to diversity. plus with equities i have to pay tax on dividends and increase in value.
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2 things:
If you think equities and land purchase are equal I suggest you take some of the 1.5M in the bank and pay a wealth management advisor, who can gather all the information available and make informed recommendations.
Buying land and buying equalities are 2 completely different investment types.

As for not investing in equalities as you have to pay tax on profits?? That's like turning around and saying, no I don't want a 100K salary increase because I'd have to pay an extra 50K in taxes!
 
mtk said:
Hi Gordon ,Can you explain that bit more please?
mtk
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It is tricky to sell the more expensive houses these days (i.e. €1m plus). The lending rules are still a handbrake. But significantly, a lot of transactions run into trouble because the buyer can’t sell his or her home in London and the banks don’t really do bridging anymore. It is underreported how bad the market is in the UK.
 
Gordon Gekko said:
Based on what I am seeing, there is major value to be had in that €1m plus
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I'd completely agree.
There's a lot better value in the 1m+ range than at any point up to 800k (in Dublin).
As well as people not being able to sell London property, the banks are still wary at this level, and the CBI rules are making things complex. I've seen cases of people coming to Ireland to take up C level roles on 300k plus, not being able to get a mortgage.
 
RedOnion said:
I'd completely agree.
There's a lot better value in the 1m+ range than at any point up to 800k (in Dublin).
As well as people not being able to sell London property, the banks are still wary at this level, and the CBI rules are making things complex. I've seen cases of people coming to Ireland to take up C level roles on 300k plus, not being able to get a mortgage.
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This is one of the reasons for my thinking, I have seen houses in my area of Dublin in the 2M+ range fall by 15%+ in the last 2 years.

Seems this price range is back to 2013 prices.
 
clueless2019 said:
This might be a bit insensitive due to housing crisis, and people generally struggling,

But I wonder if its a good investment to move house and buy something more expensive. The circumstances:

1. Pension contributions use up all tax free allowances as a percentage of salary
2. a buy to let or other investments are subject to dividends tax or CGT
3. No CGT on principle private residence
3. Houses generally increase with inflation irrespective of boom/bust. land is a limited resource.

i dont need a more expensive house, im happy in my area and dont need anything bigger.

but its an asset investment that i can enjoy. Alternatively i could use the interest payments, about 3000euro per year for each 100k borrowed on enjoying life, but i wouldn't have anything to show for it. any views greatly appreciated.
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Investadvice said:
This is one of the reasons for my thinking, I have seen houses in my area of Dublin in the 2M+ range fall by 15%+ in the last 2 years.

Seems this price range is back to 2013 prices.
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"2013 levels"

Surely not?
 
Investadvice said:
I don't understand the question in reference to the two quotations?

My 2013 statement was an opinion, I don't have quantative evidence.
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Well I highly doubt any segment of the market is back at 2013 levels, they might be down 15% but that would only bring us back to at most 2016 prices
 
Investadvice said:
First off realise how lucky we are and in some ways feel silly for asking the question but need direction/validation.
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Investadvice said:
We aren't interested in any risk in terms of using savings on equities investments
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Investadvice said:
At the same time we realise having a lump sum sitting in the bank is pointless as there is no growth and we aren't getting any utility out of it.
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First of all, I like your attitude. I'm sure you're also generous, given that you realise you lucky you are.

I don't object to your idea of trading up to a more expensive house that you might get more "utility and joy" from, but don't dismiss equities so quickly. (Anyway, given your assets and joint income, it doesn't have to be an either/or).

Don't think of equities as faceless financial assets that fluctuate wildly in value and cause sleepless nights. Think instead of investing directly in a small number of good quality companies, ideally ones you know already and admire for their values. They might be in sectors you're familiar with from your work. Hold them for the long-term, and don't worry too much about short-term price movements, provided that the fundamentals of the businesses remain sound. Read the chairman's and chief executive's reports every year (not a major overhead to read about four or five pages once a year). Over time, you will get to know the businesses and their people better. This will enable you to top up your investments in the better companies from time to time when their values are depressed, so that you're actually happy rather than sad when their prices fall. Speaking personally, it makes life that bit more interesting. It can also be profitable.
 
You don't get taxed on the imputed income you get from letting your PPR to yourself.

You don't get taxed on any capital gains on your PPR, should you make any.

The tax treatment of equities is pretty severe by comparison.
 
NoRegretsCoyote said:
You don't get taxed on the imputed income you get from letting your PPR to yourself.

You don't get taxed on any capital gains on your PPR, should you make any.

The tax treatment of equities is pretty severe by comparison.
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Indeed, this is why I am willing to have equity exposure, but only in a pension wrapper. The tax system in Ireland is not kind to equity investments.

Thank s for everyone's opinions do far, had not thought about property tax increases.

All in all though I don't feel like the strategy I laid out is financially inept.
 
I didn't say NOT to go for the bigger house. With their incomes/ assets, they can do that AND buy some equities. Yes, of course they've to pay tax on the income/gains on the equities. So what? It means they can make an even bigger contribution to society than what they're making already. If they get an average gross return of 10% a year, which ends up at (say) 6% after tax (assuming less than 40% tax on gains, more than 40% on marginal investment income), why wouldn't they be happy? In net terms, they'll be earning a heck of a lot more than they'd get from leaving it in the bank. Also, you can't spend imputed rent. You can spend actual dividends and capital gains, even if they've been taxed.
 
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