Exchequer to reap bonanza from stamp duty

THE Exchequer is set for a multi-million euro stamp duty and vat windfall as 12,000 civil servants get ready to leave Dublin.

The exchequer will make an average of 22,200 in stamp duty on every house sold by civil servants leaving Dublin and moving to the provinces under the decentralisation scheme, unveiled yesterday by Finance Minister Charlie McCreevy in his budget speech to the Dáil.

Based on an average price of 370,000 for Dublin second-hand homes stamp duty of 6% applies netting the Exchequer 22,200 on each sale.

Hamilton Osborne King director Peter Cave said while it is impossible to determine how many of the civil servants will leave Dublin and how many of these will be householders, he expects the Exchequer to benefit Mr Cave believes the number of householders leaving Dublin will be on the low side. However, if just 1,000 householders move it will generate 22m in stamp duty “Then there is the stamp duty on the homes these workers will buy when they move or the 13.5% vat element of building costs for a new house. When you include vat on agents and solicitors’ fees you can see the Government will do very well ,” he said.

Estimates of how many householders will sell-up vary but it is estimated the Exchequer will gain in the region of 30m for every 1,000 civil servant householders who move.

A significant sell off of second-hand houses by civil servants in Dublin has the potential to trigger a major wave of related selling that could boost the Exchequer enormously while helping to contain house price growth in the capital.

Peter O’Mara of Hamilton Osborne King said a number of developers have already begun to look at

the opportunities to provide office accommodation for decentralised departments.

The Exchequer will not be the only beneficiaries. It is expected civil servants who sell and leave Dublin will be able to buy bigger homes for less outside the capital and end up with a handsome tax-free profit on the difference between the high property values in Dublin and the much lower prices which pertain in most of the rest of the country.

Finance director of Simply Mortgages Barry Sheridan said the demand for property arising from relocating civil servants and the businesses they will bring to different areas will kick start the rental accommodation sectors in the towns in question.

“For residential property investors, the Government’s announcement is great news. The Dublin market has become more difficult for investors in recent years as the supply of rental accommodation took-off.

“However the decentralisation programme will mean a significant increase in demand for rented accommodation in areas where the market is still underdeveloped,” he said. Mr Sheridan said they expected the identification of selected towns to lead to an immediate increase in property values in these areas.

“While most of these areas enjoy significant availability of development land, we do expect the news to raise prices generally ,” he predicted.