what kind of measures can the Gov introduce for FTB

[SidTheDweeb]

All those first time buyers salivating about dropping prices should also realise that they won't be getting much of a mortgage if they have no job, which becomes increasingly likely as you have a stalemate which is reducing both employment and tax take like you have now.

Sure, house prices would be great if they dropped another 20% for the FTB, but at what cost. 10%+ unemployment could be the price that has to be paid.

It is wrong that so much of the economy got centred around the building boom, but like it or lump it, it was up to 25% of our economy and as that contracts, you will see serious cutbacks and spill over effects into areas of the economy you didn’t realize would be impacted.

What I am suggesting is that a responsible government should try to use measures to reduce shocks to an economy.

[...]


Having an economy where people are able to get financing for houses, and having confidence to buy those houses if they choose to do so, would be a good first step.
[...]

I'm totally lost by your posts.

Much of what you say seems totally sound, but I just can't see how it supports the issue of this thread re: government intervention to aid FTB's.

There's nothing the government can do to the housing market to support your 20% price drop resulting in 10% unemployment comment. This makes no sense to me.
The houses that are sitting unsold are already built.
There is only a requirement for so many new builds a year which is significantly less than in the past.
Therefore job losses are unavoidable.

Who benefits and loses out by house prices dropping?

 

[cancan]

It would be a mistake to think that house prices can be put in their own little box, and that a reduction in them, will have no impact on any other sector of the economy.

In banks around the country, the lack of business has staff doing nothing, which in the end, lead to staff reductions.

With the lack of income that the government was counting (stupidly) they employed too many people with too many benefits, you're going to have staffing reductions.

With the knock on impact of no sales, lack of equity in houses, you can kiss the home improvement sector good bye. More job losses, along with all the boom related jobs from estate agents, to brokers, to painters etc.

All these have a knock on impact on the local economy creating a sort of feedback loop, which runs from one industry to the next, increasing jobs losses throughout the economy. Note car sales at the moment, restaurants etc. These same small business owners have less to spend, so less tax take from them.

This reduces the government tax, which reduces the schools that can be built, improvements to the health system, roads etc.

With global profits down due to the current global recession, our nice 10% corporation tax is not bringing in what it used to. Increased costs, have also dented our competitiveness, and kids seem more interested in back packing than learning doing maths and science courses in college so the near future is not looking good either.

Basically we have the perfect storm of disaster sailing towards the economy, and whether the government takes some proper steps and some action, will determine just how bad it is going to get. (How about a FTB grant for science students who achieve good marks? - There are far too many kids doing rubbish courses in third level, which will not help ireland into the future)

Stabilizing the property market can help in a small part, but to be honest, our problems are getting bigger and bigger by the day.

I just hope that those responsible for making decisions, studied hard in school, because we have a lot riding on what happens next.

With some path to financing available for those who chose to buy homes, it would be a small, but necessary step, from the stalemate we are currently experiencing, which might save some jobs, which is better than paying dole.

But going by past, they'll probably make a mess of it.

 

[Calico]

The question I would ask is is it morally right for the the government to be targetting FTB's in their quest to jump start the property market? Property prices are only going one way at the moment, and by many benchmarks are still over valued by up to 40%. If that is the case, encouraging and aiding FTB's to buy at such inflated prices is quite wrong. Not only is it hindering the necessarcy correction in the market, but it is condemning even more young people into a situation of negative equity.

 

[MrMan]

Nope. Saying that people who believe the fact that the gov intends to bail out the developers are 'narrow minded' and have a 'mob mentality' is just plain old patronising.
And anyway, nobody above said anything about the gov and property developers being buddies until MrMan did - "And that ends todays lesson on how to hit a nerve without even trying"!!!!!

Someone has already made a mess of making 'much needed funds available', it resulted in property being x 6.5 the average income, inflated, outside the reach of most FTB's, negative equity galore, people losing their homes and/or their savings invested in property, unavailability of credit etc etc etc…… oh..... and the brown stuff we're now in aka a crash of some description

Whoever they voted for, with the slowdown in sales, the electorate is demonstrating that they're not willing to continue paying for overpriced property. Paying for it by delivering a bailout consisting of tax we paid to the gov., is just paying without a say.
.

The narrow mindedness was people saying that govt intervention was becasue they were bailing out their developer buddies, you can take what you want from what I said but the actual meaning remains the same.

It has been a common enough line on AAMthat FF and property developers are buddies or one and the same.

Finally for 'much needed funds' do you think that the govt are not in needed of a cash injection?

 

[oceanclub]

The narrow mindedness was people saying that govt intervention was becasue they were bailing out their developer buddies, you can take what you want from what I said but the actual meaning remains the same.

Well, call me cynical, but we suddenly have a lot of talk about wanting to help FTBs. The government never seemed too concerned before when house prices were rocketing beyond the means of most of these same FTBs, and when average house prices reached 10 times the average industrial wage.

Sorry, but at best, anyone who thinks that the government is more concerned about FTBs than about developers ie helplessly naive. At best.

P.

 

[MrMan]

Well, call me cynical, but we suddenly have a lot of talk about wanting to help FTBs. The government never seemed too concerned before when house prices were rocketing beyond the means of most of these same FTBs, and when average house prices reached 10 times the average industrial wage.

Sorry, but at best, anyone who thinks that the government is more concerned about FTBs than about developers ie helplessly naive. At best.

P.

Thats why I have said that thegovt are interested in getting 'much needed funds' into state coffers. Ftbs are their best chance of generating a quick source of income. I don't think anyone is under any illusions about who needs help (we all do).

 

[Brownie10]

The best thing they can do for FTBs is to let property prices fall. A house that is a €100k cheaper is better than any AH scheme or grant. Anything they introduce will only artifically support the market and end up in developers pockets, not the hard pressed FTB. But they will dress it up as helping the FTB!

 

[Lollix]

Best thing the government can do for first-time buyers: Don't meddle in the market, let prices fall to an affordable level. We need a situation where developers are getting about 15% profit on projects built in places where people want to live, not 100% on projects in the middle of nowhere. The stuff built in every village in Ireland on the back of tax incentives will just have to fall a lot further before anyone buys it.
What the government will do: Encourage FTBs to get into the market at a level above the true value of the properties, giving them an immediate negative equity. It's not just the developers who are encouraging them to do this, there is also a lobby made up of people who bought at high prices and who think that their own negative equity will somehow disappear if a lot of other suckers join them in their misery.

 

[cjh]

Well, call me cynical, but we suddenly have a lot of talk about wanting to help FTBs. The government never seemed too concerned before when house prices were rocketing beyond the means of most of these same FTBs, and when average house prices reached 10 times the average industrial wage.

Sorry, but at best, anyone who thinks that the government is more concerned about FTBs than about developers ie helplessly naive. At best.

P.

So true.

 

[Meathman99]

With all the negative sentiment regarding a bailout for property developers Is it fair to assume that everybody agrees that the government were totally wrong to offer additional support to banks last night? Or is it one rule for the bankers and another for the rest?

 

[Kemo_Sabe]

With all the negative sentiment regarding a bailout for property developers Is it fair to assume that everybody agrees that the government were totally wrong to offer additional support to banks last night? Or is it one rule for the bankers and another for the rest?

if they hadn't doen that, it was quite likely that all Irish banks would be bust within a month (and two in particular within two days)

that would have brought down the entire ecomony, not just the property market. Couldn't be allowed to happen.

 

[grackal]

Can we talk about the potential cost of this, and where the money is going to come from? People here are suggesting that if the 40,000 empties were hoovered up by eager first time buyers it would help the economy.

As far as we know from reports in the papers pre-budget, the government proposes to help people out by effectively offering bridging finance to cover the gap between what the banks will give and what a property costs. Taking a conservative estimate, this would equate to the government lending them 10% of a €300,000 mortgage. It would probably be higher than this.

If everyone was to take up the governments offer, it equates to €1,200,000,000 of funding required. Lucky for us that we are in a strong position with regards to a budget surplu... oh wait that was a few years ago.

 

[Meathman99]

Yes but for each house the government facilitates the sale of by offering approx 30k they will receive VAT payments, contributions to Local authorities, PAYE payments and tax on developer profits. As far as i know there is a lot of money in the price of a house going to the revenue in different taxes

 

[grackal]

Yes but for each house the government facilitates the sale of by offering approx 30k they will receive VAT payments, contributions to Local authorities, PAYE payments and tax on developer profits. As far as i know there is a lot of money in the price of a house going to the revenue in different taxes

Hi Meathman, would you care to take a stab at the figures for the given example? I am genuinely curious, and don't know the ins and outs of it

 

[MrMan]

Hi Meathman, would you care to take a stab at the figures for the given example? I am genuinely curious, and don't know the ins and outs of it

Well the vat payment on a house €300,000 would be about €40,000, tax would be 42% of profits I would presume.

 

[Howitzer]

Well the vat payment on a house €300,000 would be about €40,000, tax would be 42% of profits I would presume.

I'd have assumed VAT to be 40K - whatever VAT you've paid. Profits taxed @ 12.5%.

In both cases the figure may be at or close to zero depending upon the sale price versus costs.

 

[Kemo_Sabe]

putting artifical price supports in place for housing will make our depression Japanese rather than Scandanavian. It's stupid and should be avoided at all costs.

Going Scandie means that prices will fall quickly - by a lot. This will be good for FTBs who will be able to pick up their future homes on sustainable mortgages, close to where they work. Anyone who looks to buy now (before this happens) needs to have their brain examined for signs of serious instability.

It will be bad for people who bought from 2000 onwards but there's feck all we can do for them now - they are the Lost Generation of the great Irish property scam of the Noughties. The best they can hope for is that inflation will wipe out some of their NE over time.

 

[oceanclub]

Good piece from Charlie Weston here - inspired by his attendence at the Property Pin demo outside the dail ("a disparate group, made up of financial advisers, academics and engineers, protested outside the Dail last week to drive home the point that measures to boost house buying will end up being a bailout for builders. "):

http://www.independent.ie/business/...ing-will-only-benefit-developers-1485931.html

What the market needs more than anything is for sellers of second-hand houses to cut their sale prices to more realistic levels and for developers to slash their prices. Developers are desperate to avoid cutting their prices. Rather than dramatic price drops, we are seeing ruses such as free cars being offered with houses.
The money for a housing stimulus package would be better spent on the health and education sectors.
A society that values aiding developers over getting school children out of overcrowded prefabs is a society with a skewed set of priorities.

P.

 

[Kemo_Sabe]

good article that

 

[Meathman99]

I'd have assumed VAT to be 40K - whatever VAT you've paid. Profits taxed @ 12.5%.

In both cases the figure may be at or close to zero depending upon the sale price versus costs.

Its not the 40k in VAT or the thousands in council contributions that matters.

Its the thousands of houses that figure applies to that matters.
Local authorities are now in a position where they have no money to finance services because thier main revenue source (development contributions) has dried up.
By doing away with development contributions and introducing rates thier would be a more constant source of revenue