What issues for a FTB who sells within 2 years?

[garretokelly]

Hi, myself and the girlfriend are both first time buyers (aged 30). We've been considering the idea of buying a 1 bed apt in the city centre - budget about 310-320k ie mortgage about €1300+ pm.

The issue is that we'll most likely be moving abroad within 2 years and would sell the apartment again.

Is there minimum occupancy time below which we'd be liable for stamp duty clawback by any chance?
What kind of capital appreciation would we need to break even after all fees etc. for sale?
Would we be liable for CGT?

Sorry if the questions seem naive, (but if I was more savvy we'd have bought before now!) Useful feedback greatly appreciated.

 

[CCOVICH]

Hi, myself and the girlfriend are both first time buyers (aged 30). We've been considering the idea of buying a 1 bed apt in the city centre - budget about 310-320k ie mortgage about €1300+ pm.

Are you sure you can get a 1 bed apartment in (Dublin) city centre for this kind of money?

The issue is that we'll most likely be moving abroad within 2 years and would sell the apartment again.

So why not continue to rent?

Is there minimum occupancy time below which we'd be liable for stamp duty clawback by any chance?

If you sell within 5 years, you lose the benefit of first time buyer status and pay stamp duty at the higher rate. This assumes that you would have been in the stamp duty bracket in the first place.

Would we be liable for CGT?

No.

 

[Howitzer]

There are no tax liabilities, bar losing you FTB status, however the question of why you would buy and sell a property within such a short period of time given the high transaction costs involved is probably one which would be of greater relevance. You would need to achieve fairly significent capital appreciation just to break even.

In all likelihood you would be paying more in interest alone over the 2 year period than you would in rent if you chose that option instead.

I'm not going to preach on the risks involved, I'm sure you're old enough to weigh these up for yourself, but the basic numbers make very little sense.

 

[Savvy]

at 320k , your looking at 1500+ a month(and thats over 40 years at expected DEC ECB+1%).
What would be the benefit of paying this for 2 years? You'd rent cheaper, no mainteance fees,no selling fees.
Who knows where the prices will be in that short time , you could be up 50K, you could be down 100k! Certainly not a risk I'd want to take.

 

[garretokelly]

So why not continue to rent?

Renting is certainly our other choice. I'm just trying to suss out the option of buying short term. Are we not better off making mortgage repayments, even if it is mostly interest, rather than losing money on rent?

Plus if we move away, it would be nice to have 2 years mortgage (ahem interest) payments plus any (assumed) appreciation behind us. We're aware that the market may equally depreciate, but I'd like to steer clear of that particular discussion here.

Howitzer, I agree that breaking even may be tricky, just trying to understand the factors involved. All feedback appreciated.

If you sell within 5 years, you lose the benefit of first time buyer status and pay stamp duty at the higher rate. This assumes that you would have been in the stamp duty bracket in the first place.

I'm not sure I understand you clearly. Would you mind to rephrase it for me?

Another thing to consider is that the loss of FTB status may not be relevant once abroad.

 

[liteweight]

if you sell within 5 years, you lose the benefit of first time buyer status and pay stamp duty at the higher rate. This assumes that you would have been in the stamp duty bracket in the first place.

This is incorrect. A FTB may sell but not rent the property within five years of purchase or else be liable to stamp duty clawback at investors' rate. Therefore you can sell up with no tax liability at all, or rent the property and be liable to clawback and capital gains tax on it's eventual sale.

 

[Howitzer]

Are we not better off making mortgage repayments, even if it is mostly interest, rather than losing money on rent?

Can you tell me what the difference is between these 2 options?

How on earth (assuming, fingers crossed, that you broke even over 2 years with all transaction costs) would paying the bank an inordinate amount of interest make you any better off than paying a lesser amount in rent? Do you realise that in the first few years of paying a mortgage your payments consist almost entirely of interest, with very little paid off the actual mortgage?

 

[CCOVICH]

This is incorrect. A FTB may sell but not rent the property within five years of purchase or else be liable to stamp duty clawback at investors' rate. Therefore you can sell up with no tax liability at all, or rent the property and be liable to clawback and capital gains tax on it's eventual sale.

I made my point incorrectly-if the OP buys a property they lose the benefit of the FTB status (should be obvious)-and if they are only going to hold the apartment for 2 years, it is hardly worth it. There are no stamp duty liability implications on selling within 5 years.