McWilliams: "Nepo-babies" are creating a two-tier housing system

[lff12]

Classic McWilliams. He's very good at telling whatever audience that's in front of him what he wants to hear.

It wasn't quite what you think - this was largely a younger audience so not fusty oldies like me. His exact position was that SF were doing nothing to "woo" unionists north of the border, that they were likely to push for a premature border poll over all else, and that nationalism can very easily spill over into ethno-nationalism, very quickly if the primary dominant driver of a movement is base nationalism. And that wouldn't work out well. He seemed to be hinting at SF showing a bit of leg RE the housing crisis in order to attract new voters, but having every sign of eviscerating every single tax base that would actually fund resolution of that housing crisis (eg water taxes, property taxes etc). And that this would not be a good base on which to build a large body of social housing.

That's what he said anyway. IMO the current issue is critically low sources of available finance for private developers since 2008 crippling private developers, while a lack of focus on new rather than acquisition on the public side are the current barriers to scaling up housing. If SF think all this can be solved by a public only solution, they need both finance AND willing partners to develop, neither of which they are showing signs of understanding how to address.

 

[joe sod]

Agree... These people need to be incentivised as well.

There is a difference though between employees (state, multinational etc) of companies /small business etc receiving a salary and the risk profile in relation to investing in certain asset classes. I never felt any risk associated with being employed in the MNC but being invested in equities is a whole different matter altogether... Not much fun at time's when you see your investment drop 30% or more and still hasn't recovered 3 years latter (and potential never recover.. Think of those who lost heavily on irish banks fall from grace)..

It's more difficult to get the balance right than people realised and not cause unintended consequences...

That's another anomaly in the Irish system while we tax some assets like property at lower rates than other countries , stocks and shares are taxed way more heavily here than contemporary countries. We also have the ludicrous exit tax and deemed disposal regime for ETFs, nobody else does this. That means that an awful lot of money is sitting in deposit accounts earning nothing and losing circa 7% in value due to inflation.

In the UK for example there you can have an isa account whereby you can accumulate savings and investments tax free. They also have very generous CGT allowance of 12000 pounds per year even outside of ISA accounts and no tax on dividends. All this is available in Northern Ireland.
I'm just balancing the debate that wealth is not taxed in Ireland, it is once its not property or farmland.
Overall we are a high tax country for most things but we don't get delivery of the services that should result from such a huge tax take that the state is now receiving.

 

[Purple]

@joe sod, is seems that our taxation system encourages the allocation of wealth into non-wealth creating areas of the economy. It's like we are trying to move capital away from areas that create economic activity.

It probably also contributes to the reason so much of our private wealth is in property.

 

[ashambles]

That's another anomaly in the Irish system while we tax some assets like property at lower rates than other countries , stocks and shares are taxed way more heavily here than contemporary countries.

As a private individual with cash to invest what is the advantage of property over shares in Ireland?
Both are 33% CGT.
Tax on rental income for a higher rate tax payer is one of the highest worldwide (it there another country that charges 52% without some sort of allowance)

Property tax is quite low and doesn't penalize multiple home ownership, but that's not an advantage over shares.

 

[thedaddyman]

I'd be very curious to see how the figures McWilliams is stating stack up inside Dublin and outside Dublin.

In rural Ireland, the tendency has been to give a site to a child, that is still widespread and I've no issue with that.

A 4 bedroom semi in Carlow or Kilkenny would be less then half the price of it's counterpart in a decent part of Dublin. With remote working and commuting, it's a lot easier for people to buy outside the Pale then inside it. I know, I'm one of them and we bought a 4 bed semi in Leinster quite easily without any parental support from either side of the family and with 2 decent but not excessive salaries at the time.

 

[DublinHead54]

It is articles like this create a two tier system! I hate this attitude of always assigning blame to another group of people. This article feels like it uses fuzzy statistics to make a point and with that large assumptions, for example "CSO figures (2021) show that 45 per cent of first-time buyers aged 25-34 received financial assistance from their family in 2021." This doesn't state the size of financial aid, but is using this to insinuate that 45% of people are getting a full deposit.

"The social contract embedded itself along the lines of you do the right thing, work hard and you will move up socially. This has now come to a grinding halt. While earned income is rising, it does not match inherited wealth, meaning that social mobility goes into reverse."

In other words, don't bother working hard because there is somebody richer than you so there is no point?

Yes there are parents in a strong financial position to help their children, but there are very little that are going to buy their house outright, tell them they don't need to work and fund their lifestyle. We are parents, owning a home is a big part of irish society, of course we will try to help our children. That is not to say that I won't give them money without hard work.

 

[Purple]

"The social contract embedded itself along the lines of you do the right thing, work hard and you will move up socially. This has now come to a grinding halt. While earned income is rising, it does not match inherited wealth, meaning that social mobility goes into reverse."

What's really remarkable is that he's singling out one small symptom of a much bigger problem (Quantitative Easing) and treating it as if it was the root cause and blaming the people doing financial first aid on their own children for causing the problem. It's a pathetic excuse for economic journalism.

This doesn't state the size of financial aid, but is using this to insinuate that 45% of people are getting a full deposit.

Good point. It's a great example of the misuse of statistics.

 

[DazedInPontoon]

As a private individual with cash to invest what is the advantage of property over shares in Ireland?
Both are 33% CGT.
Tax on rental income for a higher rate tax payer is one of the highest worldwide (it there another country that charges 52% without some sort of allowance)

Property tax is quite low and doesn't penalize multiple home ownership, but that's not an advantage over shares.

Property is an active investment if you choose to rent it out - being a landlord is effectively running a business. Buying or selling property involves large transactions, meaning you need to use leverage if you don't have cash up front, and transaction costs are higher than shares so you can't be making frequent transactions.

You also can't leave the country with property should the government decide to change the rules about your ownership of it. You are taking on the risk of the local property market wherever your property is, which could be affected by something as local as something new in the immediate area which devalues a housing estate as a whole, or the property market in Ireland crashing, or regulation like rent controls as we've seen. You can't really diversify away from this with property.

Personally I've no interest in property as an investment beyond my own house, the closest I would come is something indirect like a REIT, but that's just me.

 

[lff12]

It is articles like this create a two tier system! I hate this attitude of always assigning blame to another group of people. This article feels like it uses fuzzy statistics to make a point and with that large assumptions, for example "CSO figures (2021) show that 45 per cent of first-time buyers aged 25-34 received financial assistance from their family in 2021." This doesn't state the size of financial aid, but is using this to insinuate that 45% of people are getting a full deposit.

I think what gets missed is that a lot of the parents offering such help do so at their own expense, and using what might be their only savings outside of a pension to do so. And in the past we've also seen cases of parents going guarantor on mortgages and taking out equity in their own homes where they really couldn't afford to do so.
There also isn't much discussion in the "Irish adult children are living in the family home wah wah" narrative, of what that contribution actually means to the older generation and how it might be alleviating poverty that otherwise might exist in older cohorts. I know when I arrived back to my parents box room in 2010, and my younger sister was still living at home, it made one hell of a difference to have an extra 400 euro a month from each of us to cover home energy bills that we later realised they couldn't afford to pay out of their pensions alone.

 

[DublinHead54]

I think what gets missed is that a lot of the parents offering such help do so at their own expense, and using what might be their only savings outside of a pension to do so. And in the past we've also seen cases of parents going guarantor on mortgages and taking out equity in their own homes where they really couldn't afford to do so.
There also isn't much discussion in the "Irish adult children are living in the family home wah wah" narrative, of what that contribution actually means to the older generation and how it might be alleviating poverty that otherwise might exist in older cohorts. I know when I arrived back to my parents box room in 2010, and my younger sister was still living at home, it made one hell of a difference to have an extra 400 euro a month from each of us to cover home energy bills that we later realised they couldn't afford to pay out of their pensions alone.

It is a complex situation, so it is easy to cherry pick statistics to suit the narrative.

Heaven forbid parents wanting to help and provide for their children.

 

[Purple]

I think what gets missed is that a lot of the parents offering such help do so at their own expense, and using what might be their only savings outside of a pension to do so. And in the past we've also seen cases of parents going guarantor on mortgages and taking out equity in their own homes where they really couldn't afford to do so.
There also isn't much discussion in the "Irish adult children are living in the family home wah wah" narrative, of what that contribution actually means to the older generation and how it might be alleviating poverty that otherwise might exist in older cohorts. I know when I arrived back to my parents box room in 2010, and my younger sister was still living at home, it made one hell of a difference to have an extra 400 euro a month from each of us to cover home energy bills that we later realised they couldn't afford to pay out of their pensions alone.

All good points. I've pointed out more than once around here that the average household size has dropped considerably over the last 30 years. The number of vacant bedrooms has also increased. There was a time that a house stayed in a family for generations and the grandparents moved to a smaller room as the next generation had their family there. We live longer and have more embedded wealth in the population so that happens far less.