Tuesday 22 January 2019

Home economics: Sinead Ryan answers your property questions


(Stock picture)
(Stock picture)

Q. I have been letting out a holiday home I own in Cork under Airbnb very successfully for a couple of years. I'm fully tax compliant and have a local agency doing the changeovers and cleaning, and I am coming up to my most lucrative time of the year with the property almost fully booked until mid-September. I was alarmed to read that the Government is planning to clamp down on such bookings. Can you tell me how it will affect me? Will I have to register with the Tenancies Board or cut back on bed nights?

A. Airbnb is immensely popular and in some cases, too much so.

Cities like London, Madrid and New York have all brought in measures to curtail the number of nights that certain properties can be let in this way and an expert group has just reported back to our own Government recommending the same.

The reason is twofold: Airbnb affects the 'formal' tourism market - and hotels and other providers believe their business is set back because of it, but separately our own rental housing crisis is interpreted as being exacerbated by properties let under Airbnb rather than housing citizens in need.

Of course, there is no evidence that freeing up Airbnb properties would result in any new accommodation to fill the need of those on housing waiting lists; furthermore the company says that 70pc of its listings are for spare bedrooms, rather than entire properties.

Of those that are, around 1,500 exist in an overall rental market of some 350,000 properties, so the point is somewhat moot.

Distorting the market just as much is the Rent-a- Room initiative, also very popular, especially in university towns, and yet the amount available under that, tax free, has been increased to €14,000, to encourage more people to take it up, so not for the first time, housing policy is at odds with itself.

Nevertheless, it seems some form of restriction will be brought in. I wouldn't be overly concerned for any immediate impact on you. You don't say where in Cork the house is, but the target here will be city accommodation that could "potentially" be used for regular, long-term housing.

If you have a holiday home in say, West Cork or on a resort, it's highly unlikely such laws will apply as these would not be suitable for homeless accommodation in any event.

Q. We had a flood in a rental property we own and the insurance company paid the claim in full, which was around €38,000 and we are ready to commence work. We have a lot to do to get it back to letting condition and attempted to avail of the Home Renovation Initiative (HRI) only to be told we weren't eligible - I understood landlords were.

A. It's most likely nothing to do with you being a landlord - they do now qualify under the HRI scheme for the VAT rebate, which is 13.5pc of the expenditure on building and other works. Holiday homes do not qualify, however, but in this case the issue, I suspect, is because you are using an insurance claim to foot the bill.

For tax rebates, Revenue generally works off the assumption that any spend is 'earned income'. An insurance claim isn't income, or investment, but rather the 'righting' of a wrong - in this case, works to repair a property after the flood and reinstate it to normal condition. A rebate would put you in a net positive position, which isn't generally allowed in insurance.

There is a worked example on Revenue's HRI guide which shows an insurance claim being deducted before the rebate is calculated from a spend, as a specific exclusion.

Clearly if the work involved is over and above the €38,000, you could seek to have the portion above it included.

Hopefully the claim will restore your property to its pre-flood condition and as such, you will at no financial loss anyway.

The Ryan Review

Despite the juxtaposition of floor-thumping interest rates alongside a roaring economy, it seems householders are still suffering from what my financial pal Frank Conway calls "Financial Post-Traumatic Stress Disorder". It's the only explanation for the increase in household deposits in banks and state instruments, bringing it to  €101bn for the first time ever.

Money hoarding, as opposed to investing or paying down debt, is the action of a public not yet convinced there won't be more rainy days around the corner, but if getting zero return on their cash doesn't worry them, perhaps negative interest rates will.

Bank of Ireland and, more recently AIB, announced that they are going to allow themselves apply negative interest rates on funds. Even though both 'pillars' were gifted a bailout by the taxpayer, this will be new language for them to learn: the bail-in.

Being charged to mind your money is not a new concept, of course; many foreign banks do it especially those outside the Eurozone. And, for now at least, it won't apply to normal customer deposits, but to big funds they operate commercially.

Until ordinary consumers feel willing to spend, or take on new debt, then banks will find creative ways of divesting them of their money. Come budget day, Mr Donohoe might do likewise, by slapping a higher DIRT tax on them too.

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