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The ‘Dublin differential’: Should city centre dwellers get tax breaks for living in the capital?

House prices in Dublin are up 12.3 per cent, so should people living in the city get a helping hand?

RESIDENTIAL PROPERTY PRICES  in Dublin have increased over the past five months, creating a widening gap between house prices in the city centre and other parts of the country.

In Dublin, residential property prices rose by 12.3 per cent, a quicker rate than in August when they were up by 10.6 per cent. Dublin apartment prices were 11.0 per cent higher when compared with the same month of 2012.

The average monthly rent in Ireland is now €825 per month, compared to €792 one year ago, while the average rent in Dublin is now €1,148 per month, according to property website Daft.ie’s quarterly rental report.

The market in Dublin seems to be one far removed from the rest of the country, and this can be said about the jobs market also.

Just this week, seven companies announced they were creating jobs in Ireland, but out of the 330 jobs announced, 275 of these are in Dublin.

Tax breaks for city living?

With unemployment still relatively high and with jobs springing up in the capital, is it a leap too far to argue that there should be tax breaks, incentives and allowances for those city dwellers that live in Dublin?

Robert Hoban, Director of Auctions at Allsop Space says tax breaks, rental protection or freezing wouldn’t really work or be suitable for the Irish rental market as it just isn’t big enough. In terms of tax breaks for people who buy houses in Dublin, there was one announced in the budget, called “Living Cities” which Minister for Finance Michael Noonan announced to try and incentivise people to the cities.

He announced that a pilot scheme would be launched that would encourage families to take up residence in Limerick and Waterford cities and that it will be extended to Cork, Dublin, Limerick and Galway in 2014.

Under the plan, home buyers and commercial property owners can apply for tax relief on the refurbishment of historic buildings.

Hoban said that the issue is there are no houses to buy, as those that want to buy are locked into their homes, either due to being arrears or due to the lack of credit available. And the houses that are for sale have loads of people vying for them.

Rising prices

Writing for TheJournal.ie, Ronan Lyons said: “Rising prices now may generate rising prices in the future because rising prices now affect people’s expectations. But the point made above still remains: unless those expectations can tap in to credit, they will not translate into a rise in demand.”

Hoban told TheJournal.ie that it is all about supply and demand, explaining that in the boom times, the government introduced tax incentives to developers to build in the outskirts of cities and urban areas. Many apartments were bought up, but as the jobs left these areas, the people wanted to also, he said.

“People bought apartments in the hope that they would move on and into a house down the line. They bought apartments because house prices at the time were too high. Developers were insentivised to build there, people bought up apartments because they couldn’t afford to live in the cities and now the only jobs that are really coming on line are in the major cities like Dublin,” he said.

He said that it all comes down to a shortage of stock on the market and the limited space to build. He said there would be no point in creating tax breaks for developers to build in Dublin as there is simply not enough land, but what about renters and buyers in Dublin? Should they get tax breaks or assistance to live in the city?

Rental freezing and supplements

Hoban said that Irish people like to own their own property.

In some other countries they do regulate the rental prices in some cities, but Ireland is not really a rental country.

Perhaps that would work if there was a shift to where the majority of people rent, but Irish people really see renting as a stop gap before they buy a house. And this can be what drives up the price.

A number of people come on to the market looking for a house in a certain area and so are a lot of other people. If the majority rented houses and apartments rather than bought them, perhaps insentives and protections would work, but right now the overwhelming majority of people are owners not renters of properties.

The Dublin Chamber said that they wouldn’t go so far as to say that tax breaks or allowances should be given to those that live in the city centre, but said that the Dublin needs to stay competitive with other international cities and the cost of living, including rent and house prices does have a part to play.

High costs

A spokesperson for the Dublin Chamber said that due to the population in Dublin expected to reach 2.1 million over the next ten years, the issue that is creating the high cost is the high demand, stating that they have long called for plan to be drawn up that will ensure there is enough housing stock.

“The increase in house prices and rent is being driven up by the lack of supply. That is what’s created this 12 per cent difference in Dublin in comparision to other parts of the country. If we don’t plan for the future, we are going to be in big touble,” he said.

“When prices rise because of a boom, what is needed to moderate prices is simply an increase in supply. What we need to understand now is why there is so little construction happening in Dublin, when the city clearly needs it,” concluded Ronan Lyons.

Do you think that people living in Dublin should be able to avail of a tax break or supplements? Tell us what you think it the comments section.

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