How many mortgage-holders are faced with unemployment?

A couple of weeks ago, I discussed the likely extent of the problem of negative equity and homes worth less than when they were bought. This had led to a rich vein of suggested blog posts as extensions, including last week’s look at which counties have suffered most from “unexpected” unemployment since the start of the recession.

That post was a first step towards estimating how many households are faced with both unemployment and negative equity. Today’s post is an intermediate step: how many mortgage-holders are unemployed? How does this vary across counties? And what would it look like if the Live Register were to hit 500,000, as some have suggested it might?

There are about 1.7 million households in the country – almost 600,000 were mortgage-holders in the Census of 2006 and they have been joined by another 90,000 or so first-time buyers since then. (Landlords and buy-to-let investors are of course another issue, but I’ll leave them out for the moment.) At the same time, since the Census, the number on the Live Register has increased from 155,000 to 385,000, meaning there are about 230,000 “unexpected unemployed” around the country, many of whom would have bought property at some point over the last decade or two assuming a stable employment situation.

Working out how many of those two groups intersect is not a precise science. Given the broad nature of the economic downturn in Ireland, I have assumed that unemployment has been indiscriminate across working households, i.e. of the 230,000 new unemployed, 55% are in homes with a mortgage, the same ratio in the broader labour force. The map below gives the approximate percentage of households with a mortgage where one person has become unemployed since the recession started. The national average is about 7% of households with a mortgage (or one in fifteen) are currently faced with unemployment.

Unemployment among mortgage-holders in Ireland by county

Unemployment among mortgage-holders in Ireland by county

It might be useful to walk through one county to explain in more detail. In Louth, where there are 44,000 households, about 14,000 of them are more than likely households with retired (and mortgage-free) inhabitants. Of the remaining 30,000 households, just under 20,000 are owner-occupiers with mortgages. At the same time, almost 9,000 people have been added to the number of unemployed people in Louth in the last two years. Assuming that the spread of unemployment was not related to home ownership status, that would mean that 60% of the new unemployed – or just over 5,000 people – are mortgage-holders. If those figures are at least in the right ballpark, that means that one in eight households with a mortgage in Louth is dealing with unemployment.

If you go to the original Manyeyes visualization, you can also look at the 2010 scenario of 500,000 on the Live Register, which assumes that the future increase in unemployment is distributed the same way the increase in the last 24 months has been. Because of that assumption, the regional dynamics don’t change – Leinster is still clearly worst affected – but the national headline naturally worsens. In that scenario, 10% of mortgage-holders would be faced with the problem of unemployment.

The final piece of the puzzle – next week’s post – is estimating how many of those who are unexpectedly unemployed and who have a mortgage are faced with the loan on their property being greater than that property’s current value.

Is it cheaper to buy or rent?

Introducing the daft report earlier this year, Gerard O’Neill discussed the possibility that we might become a nation of renters. On the other hand, there is a lot of talk at the moment, particularly from those selling homes such as these guys in Palmerstown, about how it is significantly cheaper to buy than to rent. I thought it would be worth investigating this a little more, because at the end of the day, despite all the crazy economic goings-on of the past three years, people still have to make a decision about where and how to live. Is it cheaper to buy than rent, and if so by how much? How do things look now compared to the boom years and how will things look if house prices and rents continue to fall?

To do this, I had a look at average prices and rents for three-bedroom properties around the country from the start of 2006 on. I wanted to calculate the annual premium for owning your accommodation as opposed to just renting it, bearing in mind mortgage interest relief, prevailing interest rates and changing property values and rents. After all, economic theory would suggest that if you get to own the asset at the end of thirty years of living there, you should pay more than if you don’t.

The graph below shows the difference between renting and buying in annual terms for four regions – south County Dublin, Limerick, Dublin’s commuter counties and Connacht/Ulster outside of Galway. It’s calculated for a first-time buyer couple, with mortgage interest relief based on the first year of repayments. I’ve taken ECB+1% as the benchmark interest rate – something which of course may only hold for the first year.


Annual savings for owning rather than renting, 2006-2009

Annual savings for owning rather than renting, 2006-2009

Even with property prices the way they were, it was cheaper to buy your house in 2006 than it was to rent it in everywhere around the country except South County Dublin. Generally, first-time buyers in Dublin could expect to save at least €2,000 over the course of their first year, while elsewhere they could expect to save about €1,000. Only in South County Dublin were first-time buyers actually paying any premium on ownership – in the order of €4,000 over the year for their three-bedroom home.

Sometimes I look back at 2005 and 2006 and wonder what we were all up to. Given those maths, it’s a bit easier to understand again. Of course, things didn’t stay that way. ECB rates started increasing and by mid-2007, potential first-time buyers were faced with the prospect of a premium on ownership in order of €1,000 over the first year – this at a time of uncertainty over capital values. In South County Dublin, the premium on home ownership for the first year was almost €10,000. It should be noted that in a couple of areas, South Dublin city (i.e. all areas with even postcodes), West Dublin and Limerick, it was cheaper to buy than rent – even when interest rates were at their highest. These areas have repeatedly exhibited the highest yields on residential property (about 4% over the past couple of years – high is relative).

Since late 2008, though, as lower interest rates have kicked in, there has been a dramatic swing in the maths back in favour of home-ownership. In late 2008, if you paid the asking price and got ECB+1% for your mortgage, you could expect to save €1,000 in most parts of the country – and more than €3,000 in Limerick or West Dublin. What’s worth noting is that this is at a time of rapidly falling rents as well as house prices. Looking at Q1 figures, that trend is growing with first-time buyers able to save in the region of €3,000 in their first year of ownership. Even in South County Dublin, a household will save money if they buy rather than rent.

How will these figures look in a year’s time? I’ve put in figures marked 2009 Q2 and Q3 to give an indication of how the buy-or-rent decision might look. I’ve assumed another 20% fall in house prices – that’s about a 40% fall from peak to trough. (If that sounds drastic, probably best not to read David McWilliams’ latest comparison of Ireland and Japan.) For rents, I’ve gone for 33% peak-to-trough fall (again, there are those who argue it could be more). In that scenario, buyers would continue be better off than renters in every part of the country. First-time buyers of three-bedroom properties would expect to save anywhere between €1,800 (West Leinster) and €7,000 (Dublin city centre).

To some extent, this is being driven by mortgage interest relief, which is greatest in Year 1. However, Q1 figures indicate that even if there were no mortgage interest relief, there are areas of the country where it is cheaper to buy than rent. And if house prices fall 40% from peak to trough, and rents fall 33%, it will be cheaper to buy than rent, even with no mortgage interest relief, in all areas of the country apart from South County Dublin.

What about the downside? If there are indeed significant swathes of vacant properties around the country that will continue to put pressure on rents for the next 3-5 years, could both rents and house prices halve from their peak values? If that were the case – meaning the typical three-bedroom home in south Dublin city would cost about €900 a month to rent or cost about €275,000 – the maths in favour of buying still look convincing in Dublin but elsewhere it’s a much tougher call. Without mortgage interest relief, homeowners would have to pay around €1,000 a year over what they’d pay to rent.

The tax system as it currently stands certainly strongly favours home ownership. If the government decides that the balance of emphasis when correcting its fiscal black hole should be on raising taxes rather than cutting expenditure, it may abolish mortgage interest relief and bring in a universal residential property tax. This could significantly alter the maths of buying versus renting and bring about the ‘nation of renters’. As it stands, though, even if rents were to halve over the coming year, the premium people pay to actually own their home appears too small for that to happen.

How many Irish homes are in negative equity?

Just over 500,000 thousand homes have been built since the start of 2002. Probably the same number again of second-hand homes have been bought in the same period. With the guts of one million properties having changed hands since 2002, how many of those are worth less than now than when they were bought? And how many owners find themselves owing more to the banks than they if they had to sell now?

Taking the asking prices by county from 2006 on, and Dept of Environment regional figures before that, it’s possible to construct regional average prices going back in the 1980s. Fortunately, we don’t have to go back that far – but we do have to go back into the first half of this decade. By my calculations, of the half a million homes built since 2002, about 50% are now worth less than when they were bought. That’s based on current asking prices. If asking prices are – as some contend – about 10% above actual closing prices at the moment, the number of homes worth less now than when they were bought rises to 340,000 homes – or two thirds of the houses built since the start of 2002.

But that’s only half the story. Or slightly less actually, as loans for new homes account for just under 50% of all loans. If that ratio is correct, another 286,000 second hand homes now have asking prices less than the prices they were bought for. Again, if asking prices are 10% above what’s actually trading out there, that figure rises to about 382,500. In total, that represents about 725,000 homes that have been bought since 2004 that are now worth less. Depending on whether you take Census or Dept of the Environment figures, that represents between 37% and 43% of homes in the country. Put in plain English, two in five homes in Ireland are worth less now than when they were bought.

How far back has Ireland’s property market rewound? The graph below shows average home values in eight regions for the period 2002-2009. There are three shades of colour used – the lightest (further to the right) are house price gains that been wiped out, the medium shade represents current asking price levels, while the full colour lines represent asking prices less 10%. Overall, the asking price for the typical home in Ireland now is similar to what the home was worth in March 2005. If you believe asking prices are overstating true prices, the typical home in Ireland is now worth the same as it was in July 2004. The two years of bust have undone the last two and a half years of boom. Homes in Connacht and Ulster are worst affected – they are worth the same now as they were five years ago in early 2004.

When were Irish homes last worth what they're worth now?

When were Irish homes last worth what they're worth now?

Negative equity is, however, something more particular. It refers to the outstanding debt that someone owes the bank. In other words, if they sold the house now, would they be able to pay off the remaining debt from the sale price? Naturally, this is a much more complicated exercise. Dept of Environment figures suggest that the typical loan-to-value of new homes since 2002 has been about 75%, while for second-hand homes it’s been closer to 73%. Fortunately, the figures give something of a breakdown. Making some ballpark assumptions for different years, for example any 95%+ mortgage in 2004 or any 70%+ mortgage in 2007/2008, it’s possible to give a rough estimate of the number of homes in negative equity.

Roughly speaking, about half of the homes that are now worth less than when they were bought are in negative equity, in the financial sense of the word. (This makes intuitive sense, as two out of every five mortgages is less than 70%, suggesting a substantial amount of households with some equity still knocking around.) That’s 340,000 homes where if the homeowners have to sell, they will not be able to pay the bank back solely through the money they get from selling the house.

The punchline is that about one in five homes in Ireland is now in negative equity.

How many months supply is sitting on the property market?

The US leads the way for many types of statistics – and in particular for their timeliness. The housing market is no different, with a plethora of measures such as prices and volume of transactions out every month.

In Ireland, though, we have to labour under a dearth of timely statistics on a range of economic indicators – including the housing market. Naturally, the Daft Report tries to make its contribution, publishing one week after quarter’s end so that people have the latest asking price and stock/flow information. One that I’m increasingly asked for is the number of months of supply currently sitting on the property market, a measure that’s well established in the US. It’s probably time we tried to put some numbers on it.

To do that, we need to answer two questions. The first is: what is a normal volume of transactions for the Irish property market? The second is: how many are on the market now?

On the first, the natural way to go about it would be to use the recent level of transactions. The only problem with that, though, is that the number of transactions has fluctuated wildly over the past four years, making that a somewhat erratic measure. To counteract that, the Department of the Environment have a long-run series on loan approvals, which for all intents and purposes tells us how many people are buying property every year. The numbers still vary hugely over the past two decades, in line with the vicissitudes of Ireland’s property market. In 1990, there were just 35,000 transactions – less than 3,000 a month – while in 2005, there were over three times as many transactions, 120,000 in total.

Taking the 2005 figure – or indeed anything since about 2000 – leaves open the accusation that one is deliberately underestimating the problem by overestimating the “typical” month. Then again, anything pre-1999 – and certainly anything close to 1993 – is probably not too appropriate either. To overcome this, one can view the last 15 years of Ireland’s property market as two stylized periods: a (relatively) healthy property market in the 1990s, where monthly transactions averaged 4,400, and a hyperactive property market, 2000-2007, where monthly transactions averaged 7,800.

Using the 2000-2007 figure gives us a lower bound, while using the 1993-2000 gives an upper bound. Given that Ireland is the guts of 700,000 residents bigger now than in 1993 (even allowing for outward migration), it probably makes sense to use the average of the two figures (about 6,000 transactions a month) as some sort of post-2007 reasonable estimate of what one could expect would pass through the market in a healthy post-crunch Ireland.

To answer the second question, how many properties are currently on the market, I’ve taken the series of stock of property for sale. An adjustment has been made, given the way new developments are listed on the site, to make sure that vacant new builds are better captured than the raw figures may suggest.

After all those preparations, where are we? The chart below shows the best estimate (orange) of the number of months property sitting on the market from early 2007 to April 2009 – alongside upper (red) and lower (green) bounds, based on whether one believes that the 2000-2007 level of transactions is ‘normal’ or in fact when everything dies down we’ll see a return to much lower 1993-1999 levels of transactions instead.

Estimated number of months supply on Ireland's property market

Estimated number of months supply on Ireland's property market

In a normal property market, one might expect to see three or four months supply sitting on the market – that’s about how long it takes for a property to go through the cycle of litsing, viewing, agreement, closure. The graph above – if you accept the middle ground presented – is that there has been a over a year’s supply of property sitting on the market since this time last year, compared to about 5 months at the start of 2007.

Good news? These days, good news is really just absence of new bad news! The good news is that while there is about three times as much property on the market as normal, this has levelled off – and indeed fallen slightly – in the last six months.

The first cut is the deepest – Dublin’s falls and Ireland’s property paradox

This week’s report revealed some intriguing findings in relation to the current state and trajectory of Ireland’s property market. As was discussed yesterday, for example, while east peaked earlier than west, north has fallen further than south since the peak. One of the conclusions of both these findings is that Dublin and its commuter counties have experienced falling prices first and deepest.

This goes somewhat counter to conventional wisdom, although conventional wisdom hasn’t done too well in the last couple of years it must be said! Conventional wisdom would suggest that whatever about the Section 23 wastelands and ‘ghost estates’ of Ireland’s mid-West and elsewhere, the capital – as focal point for Ireland’s public and internationally trading sectors and their upstream and downstream employers – would be alright, at least in relative terms. In an Ireland where prices fell 20% in the crash, Dublin might be 15% or so while “somewhere else” would be worst hit.

While easy to mock, there is something in this from a long-term perspective. I have argued before on this blog – in December and again in February – that the ‘overhang’ of property looks a lot worse, even with just approximate calculations, in the mid-West than in the capital or indeed any of Ireland’s five cities. With stock falling slightly in the last six months, no harm revisiting the ‘overhang per county’ chart again, with stock levels taken from today.

Percentage of property for sale by county, Ireland, April 2009Again, the message is pretty clear – Cavan, Donegal, Leitrim and Roscommon have significant property ‘overhang’ compared to the likes of Monaghan, Kilkenny and Dublin and its commuter counties. The conclusion that I would draw is as follows: as it is home to the vast majority of Ireland’s top earners, to the extent that Dublin’s property market priced in expected future GDP and wage growth – i.e. confidence – it is to be expected that prices will fall most there, as confidence collapses from a high in late 2006 to a low in 2009. (The implication is that prices would be more likely to turn around faster, were confidence to somehow rematerialize.)

Taking a longer term perspective, though, unless prices adjust faster in places like Donegal, they face the prospect of longer peak-to-trough. Indeed already, some on are fretting about the future of places like Roscommon. On a thread entitled “Rents getting very cheap in the west“, mikewest’s message makes glum reading for property holders in Roscommon:

The house prices down here are still utterly crazy because something the developers never noticed is that there is shag all work in Co. Roscommon and if you dont have work then nobody wants to live there. People talk about the ghost estates in Longford and Leitrim but they don’t hold a candle to Roscommon. Every village and town has empty or virtually empty estates and / or apartment blocks…

There is another teeny tiny problem in the west. There are one or two houses too many in some towns right now so asking prices for rents are really more aspirational than actual but not quite as aspirational as asking prices for houses.

Lopping the top half off & Ireland’s property market in a global perspective

On Monday the latest report came out, showing that asking prices had fallen just over 4% in the first three months of the year. Yesterday, I changed focus on the blog a little, as it was Budget day, and tried instead  to put some numbers on what a potential property tax could raise.

Today, I hope to give a little more detail on the findings from the report itself, in particular regional trends, and then give an international perspective also – or at least start to give one, which I think is always instructive. Below is a graph showing the quarter-on-quarter change in asking prices for the last two quarters, i.e. Q4 2008 and Q1 2009, in each county.  The most obvious finding – probably not a surprise to anyone – is that asking prices fell in almost all counties in both quarters. A second clear finding is that there does not appear to have been one or two counties more affected in the last six months than elsewhere (although one could make the argument that Munster has got off relatively unscathed since September).

Quarter-on-quarter changes in house prices, 2008q4-2008q1

Quarter-on-quarter changes in house prices, 2008q4-2008q1

What also jumps out is that the two quarters saw very different patterns. In the final three months of 2008, a few counties – such as Galway, Westmeath and to a lesser extent Donegal and Leitrim – saw the largest downward adjustments in asking prices. Two counties, Mayo and Tipperary actually saw no fall in their asking prices. This quarter, Mayo and Tipperary actually had slightly larger falls than average – perhaps a sign that sellers there had been holding for the start of the year before acceding to the realities of the market. On the flip side, sellers in Galway and Westmeath believed in Q1 that their large adjustments in late 2008 did not need to be followed up with more adjustments straight away.

Sligo has been the worst hit county in terms of falling house prices, with a fall in the region of 10%in three months alone. (Dublin city centre and Waterford city actually saw bigger falls but they are lessened by other parts of their counties.) Aside from that, it seems that Dublin generally and the counties around it were among those with larger adjustments since the start of the year.

This leads on to perhaps a more interesting question – how have counties fared since their property prices peaked? To do that, I’ve set up another Manyeyes dataset (which anyone can access) with the percentage gap between house prices in a given quarter and the peak, for each county. Where a county is sandy coloured, that means it has peaked. The deeper the blue, the bigger the fall. (One little trick with these figures is that for a county’s earlier “blues”, prices are still going up. By the second row, that’s no longer an issue.)

Change in asking prices from the peak, 2007-2009

Change in asking prices from the peak, 2007-2009

A couple of findings emerge, based interestingly on alternate axes of the country:

  • East peaked before west, on average, and by almost six months. If you draw a line from Cavan down to Wexford, 10 of the 13 counties peaked in the first half of 2008, more than half the country in population terms, including all of Dublin and its offshoots. Cork, Galway, Limerick and a few other counties actually peaked in the second half of 2007, while a couple of stragglers – Tipperary and Westmeath to be precise – only peaked in early 2008. (Interesting to note, in passing, their sellers’ totally different reactions to conditions in late 2008, as per the first chart above.)
  • North is falling faster than south, on average. If you draw a line from Dublin over to Galway, 9 of the 10 worst affected counties so far come from that half of the island. The top half of the property market – literally! – has been lopped off more than the bottom half. This means that the north-east – essentially Dublin-plus – fell first and is falling hardest, while the south-west – Munster – was last to fall and has fallen least so far. It will be interesting to compare these emerging trends, two years into the property crash, with the final statistics on Ireland’s property readjustment/crash/Armageddon/return to sanity/fill in name here.

Speaking of writing the history books, perhaps it’s no harm to have a quick look to our left and our right and see how other property markets are faring. Below is a chart of about 20 countries (with two different measures in there for the US, the first is the OFHEO measure, while US* is the Case-Shiller national index). I’ve based this on data posted on the Economist’s website, but have surreptitiously replaced the 2007/2008 ESRI data, about which there is a lot of scepticism currently, with data. The bars show the annual rate of change in house prices, including a 1997-2008 average, and figures for 2007 and 2008. (As per the Economist website, some of the Q4 08 figures are actually Q3 08 while a couple, including Ireland, are Q1 09.)

International comparison of property markets, 1997-2009

International comparison of property markets, 1997-2009

Replacing the ESRI data with the had the effect of moving Ireland from the “Club of Moderates” such as Denmark and the Netherlands, to the “Bleeding Edge” group with Hong Kong, the UK and the US (at least one measure for the US at any rate). I will do my best to try and track down the original data for this series so that a change-from-peak measure can be contructed as again that may be more instructive than a year-on-year change, particularly in six months time.

In the meantime, though, I’ll leave this up here and ask for any insights, comments or queries, as per usual! Fire away…

A €4bn Budget day suggestion – just how much could an Irish property tax raise?

Yesterday, the latest report was released. More details here, but the overall gist is that asking prices fell 4.2% in the first few months of the year. Coupled with the falls in 2007 and 2008, this means that asking prices are now down 18% in two years. On the face of it, this may not have much to do the Budget being released today, which has to deal with more pressing issues of the public finances, unemployment and the banking crisis. However, to say that Ireland’s stock of wealth tied up in residential property should have no role in plugging Ireland’s E25bn public finances gap is myopic in the extreme, particularly given Irish wealth-holding tendencies. Even if we rule out a property tax, we should at least know how much we’re throwing away in potential tax revenues, and this blog post hopes to establish approximately this potential is.

No harm, first, to recap the fiscal crisis Ireland faces, outlined in the chart below. In 2007, the Irish government expected that in 2009, tax receipts would be in the region of €56bn. By last week, the expected revenues for the year had slid down to €34bn. This €22bn gaping hole is staggering, as it represents a collapse of 40% in revenues. Any organisation with a 40% collapse in revenues has to re-examine its entire business model and Ireland is no different. Fixing the €20bn-plus gap between income and expenditure will require taking more money in and spending less. My contribution on the debate about spending less is for another day – you can probably get some inkling of what I think here – but on raising more, we have to look again at property. Property taxes in Ireland are based on transactions – we now know, and probably deep down knew all along, that the huge amounts the government was taking in over the past few years were totally unsustainable.

Government estimates of Ireland's 2009 tax take over time

Government estimates of Ireland's 2009 tax take over time

If we don’t tax property transactions, how will we tax property? And what contribution to plugging our €20bn gap can property make? Recent articles by the Sunday Independent and the Irish News of the World have discussed the scale of how much has been wiped off Ireland’s property market, while the combined report by stockbrokers Davy, Goodbody and NCB mentioned the potential revenues that could be earned by introducing a property tax in Ireland. So just how big is Ireland’s property market? The answer is about €460bn, as is shown in the graph below. The graph uses 2006 Census data on the number of households in each county, Dept of the Environment figures on new houses built in each county since 2006 and quarterly average house prices by county.

The value of Ireland's residential property, 2007-2009

The value of Ireland's residential property, 2007-2009

The graph also shows that the total value of Ireland’s residential property is about E100bn less than what it would be were no crash to have occurred. A similar amount has also been wiped off Ireland’s stock exchange, which is plotted on the same scale to allow comparison but whose remaining value is €30bn, compared to the €460bn still in Ireland’s homes.

Supposing the housing crash continues so that Ireland’s 1.6 million homes are worth perhaps E400bn by the time they bottom out. While well below the €600bn or so that it “could” have been, this still represents a huge potential stock of wealth that is largely untaxed. Simple maths says that a property tax that averages 1% could raise €4bn per annum. Assuming that the government will be aiming for a three-year correction to 2012 that lifts tax receipts by €10bn a year, while it cuts spending by €10bn a year over the same period, a property tax could solve 40% of Ireland’s tax woes. The average household’s annual tax bill would be less than €3,000 – or about €50 a week.

How would a property tax work? There are of course some significant issues that Ireland would have to iron out first, before a property tax could come in. For example:

  • Politically, older citizens have proved sensitive to the idea that the government might have access to some of the wealth stored in their homes, even if it’s to pay for their healthcare. The illiquidity of houses raises the prospect of retirees having to downsize to avoid tax bills. While this is normal in many places, particularly in the US, it would require a change in mindset here. Put more bluntly, the idea that people should be entitled to have any wealth stored away in property, as opposed to other forms of wealth, untouched by the government is out of date.
  • Recent purchasers would have to be given property tax credits, so that double-taxation through stamp duty and then the property tax would be avoided. Those who made particular purchases based on stamp duty arrangements that existed at the time may also feel hard done by.
  • Measurement of house prices would become even more important, as it would have tax implications. In this day and age, though, accurately measuring house prices should not be an arcane task. Measures such as the and ESRI/ptsb series are both based on well established hedonic price methods, which could easily be adapted to official Revenue Commissioners data, if these data were made available as they are in most other countries.
  • An instant extra tax burden is probably not what the economy needs now. Phasing it in gradually over the coming 3/4 years would be advisable as it would allow adjustment to a new system, while also showing medium-term planning on the part of the government.

Nonetheless, there are significant advantages to a property tax:

  • It gives the government a steady generally acyclical revenue stream and has an automatic stabilizer effect – i.e. the tax burden households face goes down when prices slump and more than likely their confidence slumps too.
  • There is lots of potential in a property tax to achieve other goals as well as revenue-raising. (Indeed, for the purists, taxes should only be introduced when other aims will be served.) For example, the average of 1% could hide differences, if the government wanted to incentivize, for example, energy efficiency. Houses achieving carbon neutrality or some top level of energy efficiency could be exempt from property tax, or perhaps pay a minimal rate of 0.25%, while homes that incur a significant burden on the rest of society might have to pay signficantly more. (This would require significantly more planning and guidelines for consistent rating than the recent BER scheme.)

Given that we’re talking billions – perhaps even twice as much as the joint report by the main stockbrokers suggested – this should definitely be explored in more detail over the coming months.