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  • Whoa…property tax sure is a contentious issue

    December 15, 2011 @ 9:50 am | by Edel Morgan

    Not such a good time for frogs then?

    When I wrote about the challenges  the Government face in terms of applying  a value-based property tax fairly before 2014  in my last blog I was expecting a reaction but not the level of vitriol towards the tax or the whiff of revolution.

    My  previous blog about a protester interrupting a mass property auction and warning people about the ” ill will”  they could be buying  along with a distressed property elicited mainly jokey responses – with quite a few  zoning  in on the fact that I’d made certain sweeping generalisations about grey-haired men at auctions.  But on the subject of property tax or should I say the “P” word – few were in the mood for jokes. The comments ranged from the concerned to the outraged to alarming amphibian analogies.

    A reader called  Kuhn posted:

    “Take a pot, boil the water.

    Take a frog, throw him into the pot of boiling water, he jumps right out.

    Take a pot of cold water, put the frog in the water and turn on the stove.

    The frog will sit and be slowly boiled to death.

    THIS IS WHAT THE GOVERNMENT IS DOING TO YOU ALL.”

    I’m guessing Taoiseach Enda Kenny might deny that the frog in cold water conspiracy theory has any basis in truth but some feel the household charge is a softly softly introduction to a more punitive property tax . He has defended the €100 household charge to be introduced in January, arguing that the money being raised was vital to fund public services. In an Irish Times report yesterday he  said it would help pay for “fire services and libraries and street cleaning”  and added, “these things are all funded by the exchequer up until now and it’s necessary that citizens understand that they can make a contribution of €2  per week.”

    From the comments I received it  seems  that many people  are afraid of what is coming down the tracks, they already feel they are making enough of a  financial contribution and  not everyone is convinced that the money will go to fund these services. David  said: “The EU/IMF dont really care where we get the money from as long as we get it. A tax on your house is an immoral tax especially when significant stamp tax has already been paid.”  Another reader J Mac who lived in the US said: “Look, when I was in states, property taxes started out about $500 a year in our neighbourhood, then increased every second year to where they are averaging $10k a year now.They said it is to keep the services good, but 90% of it goes into the black hole of politician-made debt. When people cannot pay, after 3 years the property may be legally seized by the county and sold off to settle the debt. Now if they owed 30k for 3 years with fines and late payments added in this could go to 100k.”

    Some of the people commenting were  outraged investors who feel overburdened with taxes and registration fees ( click here see  Fiona Reddan’s piece today about landlords feeling under siege)  and others were advocating mass non-payment . But if stamp duty revenue has all but dried up, what is the alternative to the value-based property tax? Four readers put forward  alternative scenarios .  Peter reckoned the only viable system is one which will have a ceiling limited to a fixed proportion of the household income “irrespective of the value or size of the house.I would posit 0.15% of the valuation but no-one having to pay more than 2% of adjusted household income. Adjusted household income being the total household income, less the rent or mortgage. For eg  a pensioner couple living in a €300K house this would be €88 rather than €450.However, I fear the enonomists would see this as inefficient.”  Edel  and Mary suggested introducing a council tax whereby the tenant pays the tax in a rental property  while Laura asked “Why are the Government ignoring the much simpler option to tax based on size in square meters. No one really knows the value of property any more.”

    Anyone else got any ideas?

  • Property tax, take two: the lessons to be learned

    December 8, 2011 @ 8:43 am | by Edel Morgan

    This time "mohair-suited, suede-booted, high-living bachelors" won't escape the net

    Back in 1983  when the  residential property tax was introduced by the Fine Gael/Labour coalition,  Olivia O’Leary asked  in The Irish Times if  people would be penalised for home improvements that could add value to their home. “For instance will the elaborate pine fittings be assessed? Will it be a tactical necessity to ensure that built-in cupboards and permanent fittings are kept to a minimum?” she wrote.

    And we could ask the same question about  the value-based residential tax to be introduced before 2014 as a requirement in the EU/IMF programme of financial support for Ireland.

    Elaborate pine fittings  might have had a positive effect on suburban house prices back  in the 1980s  but nowadays  they would have the opposite result (which might, in fact, herald their return?).   If  the Celtic Tiger sparked a vanilla-gloss kitchen and glass box extension show-off fest among neighbouring properties,  will the introduction of a value-based property tax see people race to have the most unremarkable house on the street?

    After all, how much more can people  expect to pay in tax  if they were to renovate a property to a high  standard  or build on an extension?

    In May 1983  a 1.5 per cent tax was levied on people’s principal residence where the market value exceeded £65,000 and the household income exceeded £20,000. Home owners were required to make a tax return stating the value of their property and failure to do so  could result in Revenue making its own valuation. If they got the valuation wrong and sold the property, they had to refund the difference. This time around, the tax is expected to be much broader, with fewer people exempt, but will still be based on a percentage of the market value of a property. It will be levied on family homes and investment property and, we as yet don’t know if property owners will be required to furnish a valuation by a professional .

    By then we’ll presumably have, the national house price register to help determine property values but it will only date back to 2010 .  House sales have been sluggish to say the least  since then so what  if a house comparable to yours hasn’t been sold on your street in recent times?

    In the 1980s  people were up in arms about the tax, there were protests,  a  High Court challenge to its constitutionality (The Court ruled it was not unconstitutional) and defaulting on a grand scale, until it was  scrapped in 1997. However, with stamp duty no longer providing a stable revenue, a property tax has been on the horizon  for some time and now the challenge for the government  is to avoid repeating the mistakes of the past.

    In a small ad in The Irish Times pages  on September 29th 1989 accountancy firm Ernst & Whinney summed it up.

    Good News

    The value of your house has increased….

    Bad News

    You have to pay residential property tax on Ist October.

    Back then the tax did not apply to people with substantial property holdings whose private residences were worth less than €65,000. John Kelly FG remarked in the Dáil in 1983 “One could be a mohair-suited, suede-booted , high-living bachelor living in a rented flat worth £64,000.Such a bachelor might own a street of houses where other people lived – he could be the beneficial owner of the entire Pembroke Estate – yet not one penny would he be taxed because he rented his main residence.”

    This time mohair-suited, suede-booted high-living bachelors won’t escape the net, because it seems that this time, investment properties will be liable for the tax.

  • Brisk bidding at distressed property auction interrupted by protester

    December 1, 2011 @ 10:14 am | by Edel Morgan

    "She told me not to tell her what it got" - a two bed apartment at The Cubes in Beacon South Quarter sold for €152,000

    Super-smooth auctioneer Gary Murphy barely missed a heartbeat when a man stood up  in front of him at the Allsop Space auction of mostly distressed property  in Dublin’s Shelbourne Hotel  yesterday and asked if he could guarantee that  buyers  wouldn’t  also be getting “ill will with their neighbours and the  people who can no longer afford to keep the property.”  Murphy, who works for UK-based Allsop,  replied  ”don’t bid then” before thanking the protester  for his “kind words”  and continuing on to Lot 28.

    Judging from the packed auction room, which from where I was sitting looked like a sea of  mostly grey-haired men aged 50-plus, there weren’t that many bidders pausing to worry about the implications of buying into a community where they may not  be welcome. Over 1,600 people turned up  and spilled out of the auction room into the corridor and bar and the bidding was brisk. The appetite for distressed property seems to be as keen as ever with 92 per cent of the 108 properties selling under the hammer in lickety-split time. Around half were cash buyers.  There were whoops of delight from the successful bidders after some of the lots were sold and Murphy commented on what a  ”happy crowd” they were. The joviality was interrupted just before Lot 28 when the protester voiced his concerns.

    I later spoke to the protester, Tom McNulty , from a group called  the anti-eviction taskforce, who said he stood up at the auction because he felt while people were getting caught up in the excitement of the auction room they can forget there’s a “human side to many of these sales and there are families suffering”. Around three quarters of the properties at the auction were being sold by the receiver  and were previously owned by investors and business people . With him was a man who was there to watch his  family business being sold  under the hammer.  He said he  appeared in the High Court recently and as he can’t afford a solicitor, had to defend himself . He  felt powerless  and “up against  a massive machine” and felt he had been harshly dealt with in court.

    Robert Hoban director of auctions at Allsop Space said he had no comment to make on the protest. “People are entitled to protest but these properties are going to be sold and what we’re offering is another method of selling this  property.”

    I sat beside a man called Jim Kelly who was keeping an eye on Lot 30 –  a two-bed apartment at Beacon Court in Sandyford which sold for €152,000. His daughter bought a similar “but better positioned” apartment at Beacon Court four years ago for a cool €420,000 . “She told me not to tell her what it got,” he said. And who could blame her…you could really torture yourself  over  the life-long  implications of paying that extra €268,000 .

    Apart from  the overwhelming majority of men over 50   (okay,  I didn’t count them but it seemed like that ) there was a smattering of women at the auction as well as a number  under-40s, and people from the Asian, African and middle-Eastern communities. Robert Hoban said he  noticed  a bigger turn-out  of people from other communities at this auction than previous. “A lot of  them have been watching and now they are taking part.”

    The property that sold for the most  was 174 Pembroke Road in Dublin 4 a mid-terrace building with two restaurants – Indian restaurant Chandni and Japanese restaurant Koshi -  that went for €630,000 and has an annual rent of €92,000. House-wise the most expensive one was 13 Garville Road in Rathgar, Dublin 6 , a long leasehold property divided into eight self contained residential units which sold for €435,000 – €15,000 over the reserve price and has an annual rent of €12,920.   One of the bargains of the auction was a four bed apartment in Northwood Santry which sold for€76,000 –  less than a quarter of its original price.

    A log cabin on the shores of Lough Sillan in Shercock, Co Cavan with access to a private marina went for €131,000, over four times the reserve.

    The success rate of the four Allsop Space distressed auctions has averaged at  92 per cent. The agents themselves expect it will eventually  level out at the UK average of  around 80 per cent. But for now  it appears that despite the current economic meltdown, there are still a lot of people out there with money and a thirst for a bargain.


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