Irish property prices fell by almost 60% from peak. To stem the collapse in prices, Government introduced a neat little tax incentive to attract attention…and buyers.Those that purchased property and held that property for 7 years would incur no capital gains tax.
Across Ireland and throughout the Irish Diaspora, the only question on the minds of those with cash was whether or not the market had reached bottom; those with cash were keen to buy in. Among the Diaspora, there were some emotional drivers but the overwhelming motivation was a unique opportunity to make a lot of easy money. With prices down so much, timing was the only concern as a means of squeezing as much value out of their investment as possible; CGT was the an added bonus.
Throughout 2012, as the CSO continued to publish property price statistics that revealed a market that was no longer in free fall, cash buyers were taking value and making their mark.
It wasn’t until 2013 that the statistical blips became a trend which brings us to now, where words such as ‘boom’ and ‘bubble’ are being used all over again.
Ireland is not in a property price bubble, there is no irrational exuberance among buyers, especially those savvy investors. Instead, there is a very high degree of understanding that the property market presented a unique opportunity to earn a very rewarding return on investment.
The big question moving forward is how long these savvy investors will stick around. Will they do a ‘Slan Leat’ as soon as the CGT expires at the end of the year? Or will they buy into the argument that prices will keep rising because all the economists keep telling us there is a ‘chronic shortage of suitable family houses‘ in the greater Dublin area (hmm, this argument sounds very familiar).
My feeling is that this property price party is coming to an end. Time was already called with CGT rules set to expire so we are now just waiting for the invited guests head off home for the night. But all is not lost, what we have come to understand is the property price collapse was exceptional and extreme. What we must make sure is that the irrational exuberance that consumers can have from time to time can not be as readily acted upon through the mass availability of cheap and easy credit. If we achieve that, then we can achieve a great deal!
Frank Conway is Founder of MoneyWhizz.org, the financial literacy and budgeting service developed for students and young adults.