mortgages & financial news

Falling residential construction to dampen GDP

Sharp fall in headline inflation expected

Government’s fiscal position is not a cause for concern

Two rate cuts expected by ECB in second quarter of ‘08

ECB President Jean-Claude Trichet – - The Governing Council is expected to keep its key interest rate on hold at 4.00% when it meets in Frankfurt tomorrow – - Nov 08, 2007 – - the economic backdrop is uncertain with the continuing credit turmoil, although not as much of a present danger as it was last August; surging oil and food prices and the falling US dollar at a time when Eurozone inflation in October surged to 2.6% compared with the ECB target rate of 2%. However, speculation on interest rate cuts is premature.

“The Irish economy expanded rapidly in the first half of 2007 – GDP grew at an annual 6.7%, with final sales (GDP excluding stock-building) expanding by over 8%. This GDP performance is well above the 5.4% growth trend established since 2000 but activity looks set to slow somewhat over the next eighteen months, primarily reflecting a housing market correction. This will result in GDP growth of 4% in 2008, following a 5.3% average for this year as a whole, before a recovery in 2009, to 5%,” according to Bank of Ireland’s Quarterly Economic Outlook* published today.

*current issue not added online at time of our posting

Dr. Dan McLaughlin, Group Chief Economist, Bank of Ireland said: “The supply response to the softening in house prices has been pronounced, with completions set to decline to 72,000 this year from over 88,000 in 2006, and to 58,000 in 2008. This is ultimately supportive of house prices. House building will not fall forever, and our expectations of a growth rebound in 2009 is partly due to a forecast upturn in completions in that year.

“The other components of national expenditure are forecast to remain supportive of growth in 2008. Consumer spending which is set to grow by 4.5% in 2008 following a 6% expansion in 2007 is in line with the growth in real household income, and highlights the absence of any pronounced SSIA impact on spending. The corollary is that consumer outlays are unlikely to fall away sharply, and the more modest projection for personal consumption in 2008 reflects a slowdown in household income growth, to around 7% from 9.5%. This in turn largely reflects lower employment growth as net job creation may emerge at 43,000 against 72,000 in 2007.

Tips on…buying and selling property in Ireland

List the features that are essential to you on a daily basis. e.g. being near public transport or having adequate parking.

Put the ten most important features in order and decide which ones you can do without.

Write down all the areas, towns and counties which you would consider living in.

How long do you intend living in the home?

What will it be like in winter and summer?

What will it be like at night, weekends and rush hour?

What is the community like?

Is there room for extending, if you start a family for example?

Will you still be happy there in 3-5 years?

Is the home too far from your friends and family?

Tips on…finding the perfect home

Get familiar with the area – the state of repair of nearby houses, the neighbours etc.

Find out about local facilities and services such as transport, fitness centres, local bars and restaurants.

Find out what facilities are available for kids.

If you will be using public transport how close is the bus stop or train station?

Visit the area at different times from rush hour to weekends and night time.

Think twice about buying an apartment or flat – it may suit you now but will it if you decide to start a family?

What direction is the garden facing? Will it have the sun in the morning or afternoon?

Is there enough room for entertaining?

Find out from the local authorities about future development plans, which could effect the value of your home and completely change your new homes environment.

Research the prices in the area by looking at estate agents windows, ads in local newspapers and property websites.

Tips on…selling.
Clear clutter.

Keep the kids and pets away from the home when people are viewing the property.

Peace and quiet is important so turn off the TV and music during visits by potential buyers.

Clean the kitchen and bathrooms.

Create pleasant smells such as baking bread, coffee and fresh flowers. Stale tobacco or pet smells turn people off properties.

Make sure the house is neither too hot nor cold during viewings.

Clean all the windows.

Speak about the local good points such as good schools or great restaurants.

Spell out the good everyday points such as low utility bills, extra cable TV connections etc.

Point out security features such as window locks, spy holes etc. as this will make people feel safe in the home.

Much has been written in recent days on the issue of stamp duty payable post separation or divorce, on foot of the Fianna Fail proposal to abolish the tax for first-time buyers with no cap on the price of the property purchased.

What has appeared in print to date has led to confusion and hordes of separating spouses contacting their legal advisors, seeking confirmation that they will be treated as first-time buyers following their separation and/or divorce.

To clarify the issue, there is – and has been for some time – a small stamp duty relief afforded to some separating couples. Where a couple separate or divorce and one party transfers their interest in the family home to the other party, the transferring party is then in a subsequent purchase treated as a first-time buyer for stamp duty purposes.

Unfortunately, this is a very specific and limited relief and afforded only in circumstances where the family home can be “saved” for the benefit of one of the parties to the marriage. This relief is not available where a couple find themselves in such financially straitened circumstances that neither party can realistically afford to buy out the other party’s interest in the property, resulting in the sale of the family home and both parties being obliged to fund alternative accommodation post separation. Full stamp duty rates are then applicable to both subsequent purchases.

The restrictive nature of this relief has long been a source of frustration to family lawyers, as it appears to be entirely anomalous to allow a financial relief from a particularly punitive tax to one party to a marital breakdown, where there are sufficient financial resources to allow a buyout of the family home, and deny this relief where the lack of financial resources preclude this alternative.