Wealthy buyers big winners in new regime

WEALTHY house buyers targeting properties worth more than €1 million stand to benefit most under the Government’s overhaul of the stamp duty regime, with massive savings of €28,750.

Once house buyers cross the threshold of €650,000, their savings will double to €21,750, compared to a house costing €600,000 which has a saving of €11,750.

Under the new, simplified system, the scale of six rates will be replaced with rates of 7% and 9%.

No tax will be payable on the first €125,000 of any property, with 7% stamp duty charged on the balance.

Only houses costing in excess of €1 million will pay a higher rate of 9% on the portion of the price which is in excess of the €1m mark.

Therefore, all houses costing more than €1m will result in savings of €28,750.

Under the new system, a couple buying a new home for the national average house price of almost €370,000 will pay €5,050 less. Their stamp duty bill will come to €17,150, compared with the previous bill of €22,200.

The new measures, which will take immediate effect, will cost the Exchequer €190 million.

First-time buyers are already exempt from stamp duty under measures introduced by the Minister for Finance Brian Cowen in the aftermath of the election. Under yesterday’s budget, the ceiling on mortgage interest relief for first-time buyers will increase by €2,000 for a single person and €4,000 for a married couple or widowed person to €10,000 and €20,000 respectively.

Announcing the new stamp duty changes yesterday, Mr Cowen said the housing market had changed fundamentally.

“A natural and welcome slowdown in property price inflation has been compounded by tighter rates, tighter credit control and changing consumer sentiment as well as uncertainty about the global economic outlook.”

Mr Cowen said there had been a number of stamp duty proposals by opposition parties which ranged from the “illogical to the impractical”.

These proposals, he argued, were overly complex, costly and would have created further uncertainty.

“What I am prepared to do is to introduce a set of small changes that would make the system more complex, but do little to improve the functioning of the market,” he said.

However, Fine Gael’s Richard Bruton questioned why the Government had decided against reforming stamp duty when the first signs of a slowdown in the housing market had been noticed. “The minister is a great man to have around six months after a property crash. While reform of stamp duty is welcome, it is six months too late.

“The Government had three chances before, during and after the election in May to reform this tax and failed to do so. Now, after the property sector has crashed, the minister acts.”

U-turn? Minister’s changing views on rate

COWEN’S U-turn? What the Finance Minister has said about stamp duty reform in recent months:

* MARCH: “We are making it very clear from Fianna Fáil’s point of view that we don’t intend doing anything which will destabilise the situation,” he said.

* JULY: Following the decision to abolish stamp duty for first-time buyers:

“I believe these proposals before you today to introduce targeted stamp duty reform aimed at benefiting first-time buyers will restore stability and certainty to this market.”

* SEPTEMBER: “We’ve done what we said we would do, in relation to stamp duty. I know this is an issue close to the heart of the Sunday Independent. But we did what we said we would do when we introduced legislation to abolish stamp duty for first-time buyers. We will also do more on mortgage interest relief in this year’s Budget.”

* OCTOBER: “We don’t want confusion in the marketplace. I said before the election what I would do, we were elected, came into office, we enacted the Finance Number 2 Bill before the Dáil rose, that provides for the exemption of stamp duty for all first time buyers,” he said.

“I have made it very clear I have said what I would do and I did it. And I don’t speculate on any budget at any time and I don’t want any significance or any idea to be taken from that.”