I am bringing up this topic to get the views of readers. I would love to hear their views. The situation that I am talking about is that the higher the property charges are raised the less chance that property prices have of recovering which prolongs the negative equity situation. This keeps a large section of society in a very bad situation both financially and psychologically. Negative equity prevents the mobility of workers. The negative equity situation has an effect on bank lending as well. Negative equity even where mortgages are being paid has an effect on spending in the general economy. In all the circumstances are property taxes the right type of taxes in the current climate. I have no vested interest in raising this topic. I just happen to think that if property prices were seen to be recovering that over all it would be more beneficial to the economy and to Government finances than the potential harm that property taxes will have on house prices. I am of the opinion that now is the wrong time to to be bringing in property taxes.
Property charges and the negative equity situation
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Brendan Burgess
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An interesting point.
It's linked to the point AJ makes in another thread - that occupiers should pay the charge and not just property owners.
If it was a wealth tax, those in negative equity would not pay it for a long time to come as they have negative wealth.
I doubt if there is such a thing as a good time to bring in a property tax. As it is only €100 I doubt if it will have an impact on the property market. However, if it's steeply progressive, it could make more expensive houses less attractive.
Brendan
It's linked to the point AJ makes in another thread - that occupiers should pay the charge and not just property owners.
If it was a wealth tax, those in negative equity would not pay it for a long time to come as they have negative wealth.
I doubt if there is such a thing as a good time to bring in a property tax. As it is only €100 I doubt if it will have an impact on the property market. However, if it's steeply progressive, it could make more expensive houses less attractive.
Brendan
A few things on this. Firstly, I don't think that it is good for the economy as a whole if house prices start rising again (beyond, perhaps the rate of inflation) as we've seen the mess that this can bring about. More so, it channels money into a static asset and even draws students into courses in this area.
I think you are right though re this tax having a negative impact on prices. I think this will be felt until the eventual property tax figure is arrived at. For example, if this was 1,000 a year (and rose with inflation), then this could be quite easily factored into the price someone would be willing to pay for a house. In fact, where I think this will be felt bigtime is for those properties where there is currently a management fee in place...who would want to buy one of those now where you could easily be looking at 2-3k a year combined?
Lastly, I suppose, the government knows that the market is pretty dead anyway so it's an opportune time to tax the houses now.
In relation to rising house prices I was thinking somewhere maybe in the region of 1to 2% above the rate of Inflation. This would help to give a modest "feel good factor". I am not suggesting anything like the lunacy of what went on before. In relation to the proposed property charges that seem to be here to stay there needs to be a base rate and that this is linked to an index and until something that is well defined is put in place there will be no movement in property. There is a fear factor out there about what is coming down the road in relation to property tax.
We live in a two bedroom apartment, in a very nice area- our maintenance fee's are over €2k and this is an added disadvantage if ever going to sell, as it is one of the first questions asked, the whole area is privatley managed, including roads/lighting/bins/landscaping/common area's etc. But if you add on a household tax onto this......well there is no hope of anyone in their right mind wanting to pay over €3k per anum!
The current household charge of €100 would have little or no impact on property prices. The fear of the unknown replacement of this household charge would have an impact on consumer sentiment and may be reducing the number of transactions. The ‘fair’ property tax to be introduced next year will have an impact as it will inevitably make certain areas, house types, site sizes, house sizes etc. less attractive to purchasers.
In the future property owners who do not pay the tax will find the decision to sell and move more difficult as there will be an accumulation of charges and interest to factor in to their costs.
The sad truth for many property owners is that their negative equity will be resolved by paying the debt rather than benefiting from a rising property market. It is an interesting concept that the tax is basically considered a wealth tax so the extension of a mortgage interest relief scheme would counterbalance some of the charge for those people who have little or no ‘wealth’ in their property.
In the future property owners who do not pay the tax will find the decision to sell and move more difficult as there will be an accumulation of charges and interest to factor in to their costs.
The sad truth for many property owners is that their negative equity will be resolved by paying the debt rather than benefiting from a rising property market. It is an interesting concept that the tax is basically considered a wealth tax so the extension of a mortgage interest relief scheme would counterbalance some of the charge for those people who have little or no ‘wealth’ in their property.
I totally accept as everyone else would that a €100.00 charge will have no impact on house prices. The €100.00 charge was intended data collection exercise from the outset. They have made a huge cockup of this you have to wonder how the next phase is going to be implemented when one thinks of all the variables that will or should be taken into account. There are hundreds of thousands of houses that are in negative equity and will be for the next 10 years or more if houses do not rise at least 1 or 2% above inflation. These properties are predominately owned by people in their 30's and 40's who may need to move for a variety of reasons. How do you move in a current negative equity house unless you have a large sum of money. Selling the house is not the solution if you cannot make good the difference to the bank. That is reality. This has nothing whatsoever to do with my own position. I am just commenting on the current position that is real for a lot of people out there.
Here we go back to everyone wanting property prices to rise. That's how Ireland ended up in a mess in the first place. Maybe, just maybe it would be better if property prices stayed where they are now. And maybe just maybe it would be good if everyone got over the fact that their property was worth 60% more in the boom.
I live in a country with property taxes and it does not affect house prices. But we had no boom due to high transaction taxes and a very well regulated rental market.
What would be good is if the property taxes funded local governement in a transparent way. The we could see where they money goes. And the amount of people complaining that they are in private estates and already pay management charges, well you bought into that, that's perfectly normal in a shared estate. Where people own property in old style estates, we have to pay our own maintenace charges ourselves. It adds up you know.
Negative equity mortgages if/when available?
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I don't know if anybody has done much analysis on this but my gut feeling is that it should not and that TRS is a marginal factor in the greater scheme of things.
For example...
€200K borrowed at 3% = €6K interest
Maximum rate of TRS is 25% and for many it will be lower so that's €6K / 4 / 12 months = €125 p.m. relief. I'm not sure that this sort of amount would be make or break for most in terms of the house purchase decision? If it is then they probably cannot afford to buy anyway...
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