Tuesday 12 December 2017

Home Economics: Answering your property questions

Pensioner to rent a room to a student.
Pensioner to rent a room to a student.
Sinead Ryan

Sinead Ryan

Q: Most people are paying property tax based on original property valuations. If you change house, can you continue to use the older valuations on your newly purchased property or do you have to reset the valuation? If you have to reset, is this one of the many reasons for the small number of property transactions?

A. To take your final question first, no, this certainly isn’t the reason for the low level of market sales. While Local Property Tax (LPT) is a factor to be taken into account in purchasing a house, to be honest, access to credit, supply and family homes in good locations is far more important. Sellers holding out for a better price in the future is another reason.

The good news is that property tax valuations, set in 2013, will now not be re-valued until November 1, 2019, an extension of three years, which was announced in the last budget. Therefore, a buyer does not need to revalue based on current price. The vendor cannot sell without up to date LPT payments.

However, the devil is in the detail. Revenue says that if a buyer believes a property was seriously under or over-valued for LPT purposes, then the new buyer must address this by notifying them, with evidence. It’s important to note that the valuation is that which would (or should) have pertained at  May 1, 2013, not its current value, so this is a difficult calculation for a prospective buyer to make. With LPT bands ranging in €50,000 brackets, it would have to be a big error for this to occur.

Q. I am a pensioner and I live quite near a university. I have three bedrooms and my son has suggested I take in a tenant to supplement my old age pension and get tax relief. Is this the case as I don’t pay tax on my pension? I’m not sure I’d want them all year, so I think a student would be good company if they are nice. My son calls daily, so he would be helping me sort it out.

A. The scheme your son refers to is called Rent a Room Relief and Revenue allows a home-owner to earn up to €12,000pa before paying tax on rental income.  Be aware that this maximum also includes any charges which entail for meals provided, laundry and other extra services if provided.

Taking in a student for the academic year is precisely what it was intended for and living near a college means you would have a good market from August onwards. You don’t need to register with the Private Residential Tenancies Board or provide a rent book, although I would certainly set down ground rules if you’re going to have a 19-year-old in the house.

You may want to consider these, with your son, for things like curfews, overnight guests, use of common areas like the kitchen, and of course, rent. The tenant won’t be there as a companion, so make sure it’s what you want for yourself. Are you up to, say, him or her having friends around or playing loud music?

In terms of tax, it is not a relief in that sense. Normally those on means-tested benefits would have the rental income taxable, but there is an exception for the State pension, which is €219pw, or €11,388 per year; well below the tax threshold of €18,000. The rent you earn will be added to this and can be earned tax free to a total of €23,388, however that would assume rent of €1,000pm for the room, which would be very high in my view.

Contact the university admissions office and see if you can put up a notice. There are good websites which advertise rooms also.

The Ryan Review

Anyone who says “just build more houses, now” as an answer to the housing crisis doesn’t understand the problem. 

On the surface, it’s simple. Corral whatever land you can (State owned or otherwise), design a cheap-to-construct model of straightforward units and pay the damn builders who lost their jobs in the recession to get on site.

But the issues are myriad and complex, not least because of our overbearing planning laws, especially when it comes to local authority housing. These have resulted in just 75 new local authority houses being built in 2015 compared with at the height of local authority home building  41 years ago when we constructed 8,794 units.

After that, we proceeded, at a pace, to sell off much of the stock to sitting tenants.

So will new Minister Simon Coveney’s plan to fast track, side-step and circumvent the rules in a merry dance make the difference? We’ll find out next month when the housing strategy is published, which will also include plans for affordable starter homes for private buyers, for which there is also a chronic shortage.

With rents at their highest ever, it had better be good.

Lack of housing is now impacting on jobs, foreign direct investment and poverty.

Mr Coveney has promised 25,000 houses per year. So did his predecessor and nobody can say Alan Kelly wasn’t hands-on.

Indo Property

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