Property prices in uncertain times

Q&A:QI have made an offer on an apartment at a 25 per cent reduction off its peak price and this offer has been accepted. All looks good - location, development etc. but I have some concern over locking in too soon!

If the property bubble could be ignored, would this level of reduction get me back anywhere close to the historical average movement in prices, or is it merely scratching at the surface?

Mr P.O'N., email

A There is a danger in these uncertain times on analysing ourselves into paralysis.

During the boom years, people jumped on to and up the housing ladder without proper consideration because of a fear that they would miss their opportunity if they delayed. The ludicrous sums of money available from the banks only exacerbated this trend. As conditions have inverted, so too have people's behaviour. Now, they put off making a decision because they fear prices will go lower. Again, the difficulty in parting banks from their cash has exaggerated the situation.

There are two situations - a home purchase or an investment. If you are in the investment market, good luck, you probably have the market largely to yourself. The main concern is your own income flow and, with rents falling, you would need to adopt a conservative approach to expected return.

If you are a homeowner, you need to reflect on whether you can afford what you are buying, whether it suits your lifestyle and whether you will be happy there. The money's important, of course, but it does not outweigh all other factors.

Will prices drop further? The consensus is yes. Are prices now below historical trend lines? That depends on the type of property and its location. It's not possible to give a categoric answer. But a 25 per cent decline from peak is not to be sneezed at. I certainly would not say it was merely scratching the surface.

Affordable housing scheme

Q I work in the building trade and outside of it as a self-employed carpenter. I earn approximately €35,000 a year. I pay €700 a month for a flat. I am very interested in the affordable housing scheme and would appreciate any information you can give me regarding how to go about getting one of these houses.

Mr D.C., Galway

A There are two schemes in operation now. One is the traditional affordable housing scheme run by local authorities around the State and the other is a new Home Choice Loan, which was unveiled in the recent Budget.

The latter scheme will provide first-time buyers with up to 92 per cent of the market value of a property up to a maximum of €285,000 for up to 30 years. The loan is a normal variable rate mortgage with is repaid monthly.

Applicants need to be in permanent employment for two years or, if self-employed, to provide certified accounts for two years.

They also need to have been turned down by at least two lenders.

However, this scheme is of no use to you because it applies only to individuals who have income of more than €40,000 a year.

The more traditional approach is open to people in need of housing and whose gross income is €40,000 or below (for a single person). You must be in full-time employment and, generally, living in the area for at least the past 12 months. Generally, purchasers will be first-time buyers.

In the case of someone like yourself, writing from Galway, you will need to contact Galway City Council or Galway County Council. They will send you a 16-page form - also available online - which you will need to fill out and return.

Your application will then be assessed and, if approved, your name will be added to the waiting list. I should point out that waiting lists for affordable housing around the State are extensive - more than 46,000 people - and, in your current circumstances, where you are renting private accommodation and are, as far as I can gather single, you could find yourself well down that list.

Income levy system

Q I note that you are combining the husband and wife's income to arrive at income levy rates payable. Surely husband and wife pay the levy independently on their respective incomes?

In this case neither income would exceed €100,000 regardless of exemptions and thus both parties would pay at the 1 per cent level. I would appreciate clarification on this as if there is a difference between joint assessment, separate assessment and individual assessment one would need to know this at start of tax year.

Ms B.C., email

A You refer to the response on December 5th when Mr A.H. was worried about the impact on himself and wise wife, both pensioners, whose combined income would marginally exceed the €100,000 level - €103,000 I believe.

I mistakenly stated that this income would be aggregated for the purposes of the income tax levy in the same way it can be for tax reliefs and income tax.

That was incorrect and you are one of a number of people to point it out. The Revenue guidelines explicitly state that the thresholds apply to each spouse individually and cannot be combined.

As a result, neither Mr J.H. nor his wife will exceed the €100,000 level and, thus, both will pay the new income levy at the standard 1 per cent rate, not the higher 2 per cent rate that applies to income above the €100,000 level.