Is a reduction in Capital Gains Tax the answer to current housing crisis?

Is a reduction in Capital Gains Tax the answer to current housing crisis?

The latest housing and mortgage figures from various sources released in recent months reiterated what we already know, there are not enough houses for sale to meet demand at present.

Just this week it emerged that mortgage approvals were up 62% in the first three months of 2017 compared with the same period of last year. However, the number of loans actually drawn down was up just 27.4% year-on-year, suggesting that those with money to spend on property are finding it difficult to find somewhere that suits their needs.

The rising cost of rents mean that for many people who can afford to, it now makes more sense to buy.

That’s all well and good when you can’t find somewhere to purchase though. This lack of supply is driving prices upwards and predicted increases of up to 10% in prices this year has been a key contributor to those claiming we have a crisis in housing at present.

Many Government moves to solve the matter up until now have proved unsuccessful.

This week Fianna Fáil put forward a suggest which they feel could solve the housing crisis “immediately” though.

Senator Aidan Davitt wrote to Minister for Housing Simon Coveney to suggests changing the Capital Gains Tax rate to encourage those in possession of the 250,000 vacant properties in Ireland to put them on the market.

Mr Davitt said: “We know from CSO statistics that there are in the region of 250,000 vacant houses in the country.

“I propose that the Government reduce Capital Gains Tax on the quarter of a million houses that are vacant from 33% to 10% for a one year basis.”

He has predicted that “going on previous examples of reductions in CGT, that an extra 10,000 to 15,000 vendors would take advantage of this opportunity and sell their properties.”

The Westmeath senator believes that by placing a clear time frame of one or two years on the tax cut, property owners would be encouraged to move quickly and sell vacant homes.

Mr Davitt, who is also an auctioneer, said: “This would be a major rapid response to the housing crisis.

“I would add that the units in question had to be vacant for the previous two years so it would not affect existing tenants.”

What are your thoughts on the matter?

  • Do you feel reducing Capital Gains Tax would encourage people to sell?
  • Are you aware of vacant homes near you?
  • What other measures can be introduced to encourage more properties to be sold?

Have your say below…

There are 16 comments for this article
  1. Rose at 11:50 pm

    Title of my spiel/rant: ‘RID IRELAND OF PROPERTY AGENCIES’
    Returned immigrant since July 2015 – made a couple of trips home prior to this with regards to viewing as many properties as pos in the time I was back re attempts to secure a house for my family – no luck during these visits & was forced into renting for 1yr. 9mts on return in an area I despised as did my kids & wasted much hard earned savings on rent to an equally despised useless landlady (think WB. Yeats September 1913 here ‘Romantic Ireland’s dead n gone, it’s with O’Leary in the grave…sums things up nicely)
    my 2cents worth to house hunters is – IF it’s within your power at all seek out the vendor in any shape or form you can for the house you want to buy doing your utmost to deal privately…this is what I had to do when all else failed with these low-life, slime ball ‘estate agents’…or so called ‘auctioneers’ who believe wholeheartedly that THEY’VE got your boobs/testicles in their grasp & are gonna squeeze them anyway THEY like in order to keep you hanging, sweating for answers & mapping out your life according to their commission, & are insanely responsible for driving up prices on property in this so called lucrative biz. they control the market & on this note I don’t have words strong enough in my vocabulary to describe the stress & heartache dealings these people can put families & singles alike through, right from the very top well known agencies to the lesser famed ones – no need to mention names as all of them can be painted with the same brush in the same shade !
    God knows I dealt with the vast majority of them…COPY & PASTE ! Caught several of them out in price hikes & phantom bids by obscene figure amounts lol 1 property by as much as €50K – there’s no way of knowing for sure with this unregulated industry of trained shark negotiators – Don’t waste precious time looking for government to do something for you – this ‘recovering economy’ whereby our creme de la creme nurses/Dr’s/teachers etc are still leaving in droves is their legacy contribution to the already or soon to be ‘hotel homeless’ kicked out in the cold from vulture funds sanctioned by said ‘government’ – it is what it is people & Picasso himself couldn’t paint a rosy on it if he tried – seek out your vendor, you have nothing to lose & possibly a house to gain, met many a seller privately who also shared their negative experiences in dealing with agents, so it works in all directions & TG it worked out for me :))) we can post til the cows come home re CGT rates but by the time anythings done property prices will have risen again to out of reach sums.
    BTW – before any ‘agents’ come on here trying to post in their defense PLZ. just SAVE IT !!! for the unfortunate folk who’ve no choice but to come your way because in my eyes & experience a spade IS a spade.
    Best of luck to those of you still searching, I know the misery n undue stress this road brings…

  2. 增达网 at 9:41 am

    受教了!呵呵!

  3. Mike at 8:30 am

    This: ‘The rising cost of rents mean that for many people who can afford to, it now makes more sense to buy.” is one of the greatest joke of all time, let me rephrase:
    “rising rental cost encourage people who can afford it to buy overpriced houses so they can get in negative equity in a few years when market drop (and enjoy a long life of pain and misery).”

    Glad I got my house in 2012

  4. Jac at 10:42 pm

    Good and creative but load of rubbish. The tax that should be tackle is the tax on construction and horrendous standards new houses have to me.
    It is not a rocket science.

  5. Dan at 8:26 pm

    Loads of viewpoints, each one backed up by their own experiences so all are valid. In respect of feedback received it is unrealistic to say all the 250k vacant houses are in places that people don’t want to live and also not every house is in negative equity. Both facts are not the case.
    Capital gains taxes increased from 20% to 33% in the crisis and this is a reason that some investors are not selling their properties now that prices have improved. A reduction in CGT rate would encourage some investors to sell some properties. Any reduction should not be restricted to only long term vacant properties. if an investor chooses to put a house up for sale at the end of a lease that investor should be able to avail of the same CGT rate as any other seller of a property. Like the comment from Dee above, I would sell property if the CGT rate was reduced to previous levels. I also will not sell at current CGT levels as it will limit my ability to reinvest. Note that I am tax compliant.
    The lack of supply needs to be addressed in multiple ways, this is another way that will help increase supply. Many years ago when Charlie McCreevy reduced CGT from 40% to 20% the actual tax take by the govt increased. A proposal such as this should also increase taxes raised by the govt which is a good thing.

  6. Ian at 7:07 pm

    Real lack of any critical thinking here by Mr Davitt, it assumes that houses can be sold and anything raise would be therefore taxable as a capital gain.
    Leaving aside that a large amount of these houses will be in places people can’t or will not live due to employment opportunities, a large tract of the country ex Dublin is still in negative equity (& sorry asking price survey’s are not a true market snapshot) so can’t be sold without the owner being able to carry the negative equity or moving into an insolvency or bankruptcy scenario. Really how this gets airtime without Mr Davitt having those type of figures available is beyond me.

  7. Paulo at 5:02 pm

    Why not decrease CGT to 15% across all of the housing market. That would be a more definite way of pulling a good mix of houses/apartments unto the market. Did a similar move by Charlie McCreevy not double the CGT inflow in one year.

    Having someone rewarded by slashing their CGT for not using their property while penalising an owner with an identical house next door who makes the effort to help the housing crisis is absolutely unfair.

    EG

    Excluding any other common allowances

    House A left empty bought for €100k Sold for €250k less CGT 10% €15k Profit €135k

    House B Actively rented,maintained and taxes paid on rental income bought €100k Sold for €250k less current CGT33% €49.5 Profit €100.5

    Is this fair?

    • Barry at 8:23 pm

      Totally agree, reduce CGT on all houses to allow some landlords extricate themselves from rental market and increase supply to would be home owners. The high CGT rates are diminishing supply

  8. Karl Gillis at 4:55 pm

    My wife and I recently tried to purchase a new build house. We were about to draw down and we’re then informed that Fingal CoCo had bought up the houses for social housing. We are now homeless in two weeks.
    How can regular families compete with being outbid by County Councils with politicians from all parties sitting on the committees?
    This is also driving prices up…

    As mentioned before….just build more houses… Simple.

  9. STEPHEN at 4:18 pm

    Once again we can see vested interests at play in Irish society (a Senator who just happens to be an auctioneer. Restrictive timelines do not help hard pressed home seekers and forces would-be vendors to accept unreasonable offers. This is another piecemeal effort by a politician to plug a massive hole with a little finger. If the government spent less time talking and more effort was put into a real program of building good quality public housing this would go some way to relieving the problem.

    I agree totally with Emie’s third paragraph in regard to the discriminatory nature of local government and planning. In contrast a Developer is allowed build a group housing scheme in a rural development and then is free to sell these homes to anyone without meeting residency criteria-so double standards. So, come on government; forget about Brexit and Donald Trump and lets get serious about housing.

  10. D. O’Connor at 3:58 pm

    So, Demand for housing is through the roof, prices are exceptional, why is there not more building? it seems like an exceptional opportunity for builders to capitalise on a hot market, that may, with Brexit, be getting even hotter.

  11. Jimmy at 3:32 pm

    House price increase are not only blame on goverment. Auctioneers are one of the . They push the price up as well. I came across when buying the property I wait two weeks and ask any offers, the auctioneers said no. So I put in the offer, within one hour they rang me back and said somebody put in an offer high than your offer.is that true? And no one know is it the someone else or not. NOT like u sit in the Auction room u know someone are bitting.

    Also the auctioneers they put the price down to start with and let people bitting on the property, I think this in not right at all.

    Why don’t the goverment control of this way of buying property or why not put all the properties in the auction room. Rather than private auction.

    I think this is one of the reason the property price are going up and up.

  12. Emie at 3:24 pm

    My partner and I are hoping to buy a site within our budget and build a timber/log home. We found a suitable site but alas we can’t build on it as we are not from the area although we are renting in the local area for four years. Our lease expires June 2017 and homelessness will be the next step. We cannot find a rental accommodation that allow dogs in our price range and no we are not willing to give up my dogs as they are part of my family. I am willing to drive more than an hour to work hence finding a site in the rural area. If the county council at least look at individual family needs instead of a blanket rule in the rural development area and give unrestricted planning permission to people who are willing to buy sites and build their first home far away from their work a lot of problems will be solved.

    It is a discrimination for people who wants to build an affordable homes and build their roots in a rural Area and be told that planning will not be given because A. You are not a farmer B. You have no ties to the area C. Your family of origin is not from the area etc etc etc.

    Maybe the government should look at this too and not concentrate too much in building houses that a lot of people cannot afford.

  13. Dee Costelloe at 3:21 pm

    We would sell three properties right away if CGT were reduced. There is too much hassle and levies and paperwork involved in rental properties these days. Because our tenants were under financial pressure we haven’t increased rents since 2011 so now we’re stuck with not be able to get market rates. That means it’s become uneconomical and a big part of our pension planning has also been wiped out by negative equity.

    • Barry at 8:34 pm

      It’s incredible and so shortsighted to think that a limit on rental increases to existing/rollover tennants would not reduce the availability to others of securing a rental property and distort even more the ‘rent pressure zones’.

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