Back to the Future - FTB incentives to be reintroduced by Gov
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John Locke
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As somebody who will shortly be selling a house in the FTB market, I think it's a great idea 
As somebody who will shortly be selling a house in the FTB market, I think it's a great idea
You might want to hold off until after the budget - it sounds as though the Government is going to boost your achievable sales price.
It's depressing to see recent mistakes being repeated so quickly - it really is a shocking waste of taxpayers' money.
Brendan Burgess
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As reported it's not a good idea.
The best initiative would be to significantly reduce the government's tax take on new houses.
The second best would be to give a grant to anyone who buys a newly built house.
Giving first time buyers grants to buy second hand houses achieves nothing.
Brendan
The best initiative would be to significantly reduce the government's tax take on new houses.
The second best would be to give a grant to anyone who buys a newly built house.
Giving first time buyers grants to buy second hand houses achieves nothing.
Brendan
We had that type of grant before Brendan - it effectively operated as a State subvention for builders. Do we really want to go down that road again?
It might even breach EU State aid rules.
I agree with Brendan's earlier points, reducing the tax take would make more sense.
Going down the grant route - one rider, any grant scheme should be for all buyers (not just FTBs) but not for all new homes.
There is currently a grant scheme for initiatives that improve your BER rating on existing properties.
There should be a grant scheme for the purchase of new homes with the highest levels of BER ratings.
Going down the grant route - one rider, any grant scheme should be for all buyers (not just FTBs) but not for all new homes.
There is currently a grant scheme for initiatives that improve your BER rating on existing properties.
There should be a grant scheme for the purchase of new homes with the highest levels of BER ratings.
I disagree for the reason that any scheme that tells the seller how the buyer is fixed incentive-wise just means the price goes up.
This happened in 1980 when Government brought in the FTB grant of 1,000 quid:
http://www.irishstatutebook.ie/eli/1980/si/296/made/en/print Signed on 25th Sept 1980, a Thursday...
I viewed a house in Mulhuddart for a couple on a Wednesday, and again on Saturday: the grant was announced Friday.............
The same applies for all the SEAI grants: e.g.: EWI project 16,000 without grant, 21,000 with 5,000 grant, same price to home owner, waste of tax payers money.
Reducing the tax on houses will have zero effect as its whatever the market will bear.
I have a very limited understanding of how house prices are arrived at but one model I have seen with a builder is based on buyers ability to borrow/repay.
His model has a number of different scenarios but one is based on a % of borrowers income: e.g. say 35% of after tax income
so if the monthly after tax income is 1,000, they can set aside 350 for the mortgage.
Then you look at industrial and other wages........
So assuming certain interest rates and a loan duration, it is possible to derive a capital sum.
When I first came across this sort of modelling, banks were doing 25 year mortgages.
During the booms, as the term went out to 30 and then eventually 40, [as well as the brokers completing applications based on renting the 4th room in a 3 bed,]
the builder just kept increasing the prices as per the above ability to borrow/repay model.
Ps: Joe-90, I was writing my longer version of your succinct point while you posted!
Brendan Burgess
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At the moment there is 12.5% VAT on the selling price of a house.
According to all the arguments here, we might as well put that up to 35% as it just means that the builders will reduce the prices of houses to compensate.
It is not profitable to build houses because of the high costs of construction and the high costs.
My absolutely preferred solution would be to bring down these costs. More house building would be profitable and more houses would be built.
I don't see a huge difference between charging €25k VAT on the selling price of a house and giving the buyer €25k on the one hand, and cutting the VAT to zero and giving no grant on the other hand.
But I think that most of us are agreed that giving FTBs a grant to buy second hand houses is just daft.
Brendan
Cutting VAT or giving grants directly to FTBs both constitute State subsidies to builders. Neither can be expected to reduce the cost of housing for end-users so what's the point?
It increases the profitability of the business of building houses (and the business of lending money to builders) but that's all it achieves.
Limiting grants/subsidies to new builds also has an obvious knock impact on the price of second hand houses.
It's a waste of taxpayers' money whatever way you look at it.
It increases the profitability of the business of building houses (and the business of lending money to builders) but that's all it achieves.
Limiting grants/subsidies to new builds also has an obvious knock impact on the price of second hand houses.
It's a waste of taxpayers' money whatever way you look at it.
Brendan Burgess
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OK, then why don't we have 50% VAT?
Brendan
Brendan
I'm not suggesting that builders (or their products) should be taxed more heavily than any other sector of our economy - I simply don't understand why the building industry should be treated more favourably than any other industry.
Builders will sell houses for whatever the market will bear, regardless of the VAT rate on houses.
These types of subsidies ultimately give rise to unfortunate distortions within our economy - think of all the people employed building houses where there was no sustainable demand during the bubble years. All that capital, both human and financial, could have been allocated to far more productive ends.
Distorting the market won't solve the problem.
So, the government can't cut VAT rates because it's a State subsidy? What a bizarre statement - so you're saying VAT rates should never be reduced?
There are already different rates for different products/services. A 9% rate was introduced to stimulate business in one sector and guess what - it worked. The building market is already distorted - it has taxes imposed on it unique to the industry (so called development levies). Yes, many government interventions have a poor record, but many don't - unless you pull back completely and treat everything the same (VAT on food, anyone?) then the "don't distort the market" argument doesn't make much sense. Is there any country you cam point to where a government has pulled back completely to good effect?
Hoteliers certainly made hay from the proceeds of the pension raid that was used to fund the VAT cuts. And (worthy?) newspapers survived that would otherwise have gone the way of the dodo.
Any business sector will thrive if given a sufficient advantage over other business sectors by the State. Unfortunately, other business sectors will equally suffer from the lack of advantage so it's really a zero sum gain.
Absolutely agree with you that development levies should be abolished. The capital costs expended by the State in providing the necessary infrastructure to allow for development should be borne by end-users (the property purchasers) in the form of property taxes.
Pumping more cash into a supply constricted housing market will not produce affordable housing.
Surely that's the goal?
Any business sector will thrive if given a sufficient advantage over other business sectors by the State. Unfortunately, other business sectors will equally suffer from the lack of advantage so it's really a zero sum gain.
Absolutely agree with you that development levies should be abolished. The capital costs expended by the State in providing the necessary infrastructure to allow for development should be borne by end-users (the property purchasers) in the form of property taxes.
Pumping more cash into a supply constricted housing market will not produce affordable housing.
Surely that's the goal?
Although such things can't be proved definitively, the increase in activity more than made up for the rate cut from 13.5 to 9 - these things are not zero sum gains.
I'd agree abolishing or greatly reducing development levies - I saw a planning permission recently that was looking for a levy for "Metro North"!! - would be a preferable starting point. Local authorities will fight that, though, as it's one of the few income streams they have.
Why do you think the VAT cut increased economic activity? Did hoteliers charge lower room rates because the government was taking a lower cut? Like heck they did!
Could those journalists that retained their jobs courtesy of the pension raid/VAT cut have retrained and done something else with their time?
That's really the crux of the argument - I don't see how a VAT cut results in a lower cost to the end-user. The product/service provider will simply charge the end-user whatever the market will bear. The fact that the Government may be taking a lower share doesn't change that fact.
And there's the problem in a nutshell - development levies should not seen as a sustainable income stream. Aside from anything else, they create huge conflicts of interest when it comes to planning decisions, etc.