The market sets the price of the house. If VAT is removed the seller will just end up with more money in their pocket. The only way to reduce price is to increase supply. The rest is just doing things for the sake of being seen to be doing things.Purple - VAT is a tax on the purchase of a new home. It is paid for by the purchaser, like any sales tax. The reality of this tax unlike consumption or income led tax is that payer borrows to pay for it. The reality is that on 300k new home, some 40k is VAT, borrowed for 30yrs at say an average rate of 4%, that results in 70k in payments (30k in interest). The industry you could argue that VAT subsides is the banking industry, driving larger borrowings.
If you want more of something, new houses / housing, which we do then you don't tax it but you damn well ensure that competition at a supply level means VAT reductions over time accrue to the customer and not the supplier. Your factory built homes would be a perfect remedy to that and looks very interesting.
The market sets the price of the house. If VAT is removed the seller will just end up with more money in their pocket. The only way to reduce price is to increase supply. The rest is just doing things for the sake of being seen to be doing things.
Or we'll end up buying back property from the same funds/ people/ companies to which they were sold at a discount by NAMA. Think of the noise that the Paul Murphy's of this world will make when that happens!If the price of admission to solve the housing crisis for thousands of families is to see a few new Johnny Ronan's spinning around in Range Rovers sign me up......because as soon as that happens a plethora of Johnny Ronan wannabee's will go into property development but driving Toyota Highlanders and undercutting Johnny.
House prices are set by the market; if you are a builder you sell at the market price and make your profit on your efficiency or having lower costs
Also house prices exhibit serial correlation – once you know the price a house has sold for, if you are a seller you will add on say 5 - 10 grand extra to that price, as your selling price, and house prices increase this way incrementally to soak up cash coming into the system.
And as other posters have pointed out if you reduce VAT it's just a gift to the construction industry.
My suggestion, for what it's worth, is not to interfere with house prices and market dynamics, but just to increase housing supply by increasing housing density in low density areas.
The ‘market’ is not some arbitrary thing - it’s made up of supply and demand. If supply were to increase beyond demand builders / house sellers would react by undercutting each other..
The evidence would suggest the opposite: the last time construction surged, prices did too.
For what it's worth, my suggestion is that if the government wants to increase supply, it should do so by building itself, either directly through local authorities or by funding some body set up specifically for the task.
No. It says that unlike equities, changes in house prices do not follow a random walk.The inference here is houses prices can only ever go up.
Builders can't increase supply immediately as the number of houses that can be built is at any point in time is the number for which they have received planning permission. If demand is falling off, you just don't build. If you are foolish enough to build you just run the risk of ending up with a ghost estate (and going bankrupt). During and after the crash house prices went downwards because the supply of mortgages disappeared or because mortgages became very expensive. And demand also fell, after all who wants to buy a house and go straightaway into negative equity? Better wait until prices fall further.A supply shock (which in effect is my suggestion) or a demand shock (a global recession leading to mass unemployment like we had '09) will drive house prices downwards.
But isn't this what we do at present? Apart from actual construction, housing is the most state controlled part of the economy. The PRA certifies your title; zoning/housing density is controlled by local authorities; housing standards are controlled by the D/Housing; planning permission is controlled by the local authority; housing finance is controlled ultimately by the Central Bank through quantitative restrictions on mortgages and rules on the supply of mortgages. The only thing that the state doesn't control or highly influence is the liquidity the builder needs to start up and the actual construction process itself. If NAMA makes cheap loans available to builders it is providing start up liquidity. So the state is doing and controlling everything except for the construction process. Is this not the problem? Excessive state involvement in housing has failed to deliver decent houses at reasonable prices when people wish to buy them.For what it's worth, my suggestion is that if the government wants to increase supply, it should do so by building itself, either directly through local authorities or by funding some body set up specifically for the task. The evidence is that messing with the "market" frequently fails to deliver the desired outcome and equally frequently has undesired outcomes (ghost estates anyone?).
Builders can't increase supply immediately as the number of houses that can be built is at any point in time is the number for which they have received planning permission.
You may get some reduction in prices initially, but if the Central Bank keeps pumping money into the system, purchasers just bid up the price of houses. But this is a subject for debate.
But isn't this what we do at present? Apart from actual construction, housing is the most state controlled part of the economy. The PRA certifies your title; zoning/housing density is controlled by local authorities; housing standards are controlled by the D/Housing; planning permission is controlled by the local authority; housing finance is controlled ultimately by the Central Bank through quantitative restrictions on mortgages and rules on the supply of mortgages. The only thing that the state doesn't control or highly influence is the liquidity the builder needs to start up and the actual construction process itself. If NAMA makes cheap loans available to builders it is providing start up liquidity. So the state is doing and controlling everything except for the construction process. Is this not the problem? Excessive state involvement in housing has failed to deliver decent houses at reasonable prices when people wish to buy them.
Rather than try and influence "the market" to produce more housing, which has demonstrably failed, why not just start building?
The other issue is who will build them? We have a shortage of construction Tradespeople.You have said this a couple of times. Is it not clear that building is a huge interference in the market?
If Dublin City Council decides to build 1,000 social houses, they will push up the price of residential land in Dublin City, making it more difficult for those who want to buy houses. They will also push up the cost of building.
Brendan
If Dublin City Council decides to build 1,000 social houses, they will push up the price of residential land in Dublin City, making it more difficult for those who want to buy houses.
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