First-time buyers gain most from provisions

THE troubled property and construction sectors were neither rocked nor shocked by the measures announced in Budget 2009.

First-time buyers get a slight mortgage interest relief increase, rates of commercial stamp duty in that moribund market sector are reduced from 9% to 6%, and owners of second homes and residential investments will have to pay an annual €200 level to local authorities.

Any intending house buyers expecting a budget incentive to get off the fence won’t find any big stimulus to move just yet, but the simplified shared ownership scheme for first-time buyers and easing of access to mortgage funding for first-time and affordable house buyers through the Housing Finance Agency and local authorities has been welcomed (see homechoiceloan.ie).

First-time house buyers who have bought post-2005 when prices took their last final spike, as well as any now seeking to buy, will get a bit of a dig-out in terms of more mortgage interest relief, front-loaded to the first couple of years of their purchase. Their relief will be 25% in years one and two and 22.5% in years three to five. That extra cost will be met by all other mortgagees, who have had their interest reliefs cut from 20% to 15%.

Owners of second Irish properties, either investments, rentals or holiday homes, will have to pay an annual levy of €200, to go to the benefit of the relevant local authority. The measure is expected to garner about €40 million in a full year, indicating an impact on up to 200,000 properties/owners.

Estate agents’ body the IAVI said the €200 levy on non-principal residences could be “a stealth tax on investment properties and, while some taxation may be justifiable on holiday homes, having established such a principle, the temptation will be to progressively increase the tax”. A number of estate agency groups welcomed the residential measures introduced to help first-time buyers who have difficulty getting mortgages to access mortgage funding through the Housing Finance Agency, but said further clarification would be needed.

Capital spending on roads is cut by €157m to €1.4 billion, and spending on public transport infrastructure is cut by €70m to €900m, allowing for LUAS extensions, completion of the Cork-Midleton rail line and planning and enabling works on Dublin’s Metro north.

Cork city’s plans for incentives for docklands renewal will have to await the Finance Bill, but the Government signalled its intention to bring in a ring-fenced tax incentive scheme to relocated so-called Seveso-listed sites, where possible hazards currently hinder the residential and commercial regeneration in brownfield and docklands sites. It will be subject to European Commission approval under State aid rules.

Persons selling property (other than primary residences) and disposing of other assets will face a slight rise in Capital Gains Tax, up 2% to 22%, a move which is set to garner an additional €190m in 2009, with changes also in dates for payments due.

Budget changes announced on decentralisation, with a number of moves deferred pending reviews in 2010, will have an impact on some local markets and locations, while the plan to abolish or rationalise some 41 Government agencies or bodies as well as to select further army barracks for sale may also have an impact on local development, construction and property markets.