The Grumpy Old Man

Index Home News Eco Life Etiquette Big Bro Business Money Contact Forum About Blog

....Unused Second and holiday homes....

....Unused second and holiday homes, of value to whom?....

One might ask, is there any solution to this? At a time of national austerity Grumpy asks if the building of so many housing units and selling them as little more than holiday homes makes economic sense?

This is particularly so when one hears that government tax incentives allowed the capital cost of these homes to be amortised across ten years of income tax. We have to ask who actually benefited from this?

The farmer or vendor who sold the plot of land in the first place may feel he has benefited, but when farms are relatively small (as they are, here in Ireland) he has actually significantly reduced the amount of land from which he generates his primary income. Capital used as income certainly does not make sound financial sense to Grumpy. One might ask, what does the farmer do with the capital generated? So far as Grumpy can see, he goes out and buys a very large, expensive tractor which in many cases is far too big for the amount of land being farmed. In fact, the size of tractor is probably more suitable for a farm four or five times the size. In this instance, each of these farms buys their own tractor, and where in the sense is that, four or five tractors for a tract of land that would normally only fully utilise one! And are new tractors manufactured in Ireland? No, the money used to purchase the tractors leaves the country.

The builder who purchased the plot, or the ultimate purchaser of the property has probably borrowed the money from a bank. Judging by the banking collapse in Ireland, in simple terms, the bank did not have that money to lend in the first place. It is accepted that some of the purchase money goes to the 'brickies' and people who make the building materials. But again some of the fixtures and fittings in the house are purchased overseas, so much of the money that the banks did not have, but still lent out, ends up again leaving the country.

The builder takes his profit and buys an expensive car so more money that the banks do not have has left the country.

At the height of the property boom we heard of many people purchasing property overseas in places like Bulgaria. Again, more borrowed money has left the country.

The moral of these few examples is that the country as a whole will never get rich by people building houses and selling them to each other. In fact, with the amount of money that leaves the country, quite the opposite will happen. And much of this is because a few people want a second (holiday) home.

What is galling about this situation is that everybody claims there is a shortage of houses. Grumpy is sure there is a simple solution to this scenario. A few years ago the government introduced a tax on property that was not a primary and principal place of residence. Grumpy sees no reason why that tax should not be increased very significantly. To do so would generate revenue for the economy and in many instances encourage people who own these second homes (which they only sleep in three or four times a year) to sell them. After all, when they are not using the accommodation it is doing absolutely nothing for the local economy except in many cases just creating an eyesore. The other benefit is that this would increase the supply of houses for sale. In accordance with the basic laws of supply and demand, as the supply increases, the cost will either stabilise or fall.

What Grumpy wants to draw attention to is that many of these second homes are a blot on the landscape particularly as the gardens become untended and overgrown and the property itself soon begins to look empty, forlorn and uncared for.

This leads Grumpy onto the topic of the number of buildings scattered around the countryside in various states of dilapidation. It is clear that the owners of many of these properties have built a new one nearby and just abandoned the old one leaving it to moulder into the countryside. Almost all of these properties offer a tremendous opportunity as a "fixer upper". Many are in absolutely superb locations and represent a fantastic opportunity for people with a bit of DIY skill to "do them up", finishing up with a beautiful property worth far more than their overall financial investment.

As this grump mentions financial penalties through the tax system, perhaps some of the monies generated through a larger second homes property tax could be channelled into incentives to assist people in increasing the current national housing stock by bringing these ruins back into mainstream use. An additional bonus to the scheme would be the removal of many ruins from the countryside and help restore beauty and tranquillity back into the natural environment.

Once again I believe there is a cultural problem that people want to hang onto property for no other reason than it has been in the family for donkeys yonks. In this day and age with the world getting more and more overcrowded, this approach really is very selfish, anti social and therefore should be discouraged. The scheme outlined above represents a carrot and stick approach that Grumpy feels could go some way to resolving the problem.

Finally I cannot let this "government grump" pass without observing that the quagmire that led to the 2008 banking and property price collapse was multifaceted. No doubt one of the driving factors was the employment provided by this frenetic building of housing units. These days, rumours abound that the governments in Ireland and the UK are talking about getting the economy moving again through the stimulation of the house building market. I ask you, do these idiots never learn? Having said that, it can be identified in this group of three grumps that there is a way of getting the construction industry working again and that is to get them building infrastructural projects such as sewage and water treatment works, hospitals and schools to name but a few.