Q&A: We want to buy a house, but when is the best time?

Newlyweds juggle whether to buy now or buy later

I got married recently and we want to buy a house. When is the best time? Should we buy now before prices increase, or should we wait to see if interest rates fall or if the Government bring in new incentives for first-time buyers? We do have “sale agreed” on a house we like.

Mr MO'N, Dublin

The “best” time to buy a house is when you find one you want to own and have the financial resources or credit to do so. I realise that does not answer your question in any empirically definitive way, but there is no cut-and-dried answer.

The “season” for selling homes tends to be late spring and early autumn, that is April/May and September/October. It is possible that a price on a home that didn’t sell in those periods might be dropped a little, or the owners might be open to a slightly lower offer. But you also run the risk of losing out on a home you really want.

As for interest rates, they are at historic lows. And while they are not likely to rise for the next while, there really isn’t anywhere for them to go in terms of falling unless someone persuades the Irish banks to cut their margin on variable loans.

And, for all the sound and fury, that does not seem very likely, at least to any noticeable degree, not least as the same banks are still nursing losses on tracker mortgages and no one in Government or elsewhere wants to risk undermining the financial services sector in EU-wide stress tests or otherwise.

On incentives, the Government has now clearly signalled the plan to introduce them but that is likely to be in the budget in October, and in any case that might in itself push prices up further.

Bottom line: This is a 30-year purchase and if you have found something you like enough to go “sale agreed” and have the wherewithal to do so, I wouldn’t get too smart about it. You could lose your dream home.

If I purchase an apartment for my son to live in rent-free, would he accrue a tax liability for the financial benefit he would receive, and/or would I accrue a tax liability for “notional” rent?

Mr PK, Dublin

You wouldn’t, but your son would. In the old days, it was quite common for people to buy investment property and effectively rent it out to their children gratis. This was done under tax rules that allowed parents to provide for the reasonable expenditure on their children.

Section 82 of the Capital Acquisitions Tax Consolidated Act 2003 stated that money paid by a parent for “support, maintenance or education” of a child would not be considered as a gift or inheritance for tax purposes where it would be considered “normal expenditure” of a person in the parent’s circumstances and is “reasonable having regard to the financial circumstances” of the parent.

Revenue adopted a fairly common- sense approach to the section but, as with so much else, the Celtic Tiger years saw a rise in the general sense of entitlement and fairly widespread abuse of the provisions by those fortunate enough to be in a position to provide for adult children. As a result, the section was amended in a way that defines it far more strictly.

Under the new rules, you can certainly buy an apartment and allow your son to live there rent-free, but the annual notional rent – minus the €3,000 small gift exemption that you are allowed give to your son or anyone else – will be treated as a gift under the capital acquisition tax/gift tax rules.

Your son is able to receive up to €280,000 in gifts and/or inheritances from you and his mother before he actually has to pay tax on them. This is a aggregate figure, so anything he has received from either of you since December 5th, 1991 outside of the small gift exemption, must be added together by him to determine whether he yet owes any tax.

In terms of assessing notional rent, you will need to get a realistic figure for similar properties in the block or area from a local valuer or other source to assess the size of the annual gift.

Can I offset a loss against future sale of my home?

Recently you advised me that I would not be able to offset a loss on an investment property due to a forced sale by the mortgage provider against tax due on income I received by cashing in an AMRF. But am I right in assuming the loss could be offset in the future against any capital gain from the disposal of the family home in the future?

Mr BM, online

No, you are not right. But that should not give you cause for alarm.

As I advised last week, you cannot offset a capital loss against income tax, which is what you are liable to pay if you cash in your Approved Minimum Retirement Fund (AMRF) pension.

So why would you not be able to offset the loss against any future gain from selling your family home? Because family homes – or your principal private residence as it is known in Revenue parlance – are exempt from capital gains. So, when you sell your family home, regardless of the actual gain in value over the period of ownership, there would be no capital gains tax liability, and therefore nothing to offset the loss against.

The corollary, unfortunately for those who have fallen into negative equity, is that you cannot offset any sale from a principal private residence against other capital gains.

There is one possible exception to that position if you rented out the property for part of the time you owned it – perhaps while working abroad or whatever. In that case, you would have to assess a capital gain (or loss) for that period of ownership. And, assuming it is a gain, you then would have something to offset your current loss against.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice