And, the slight breaks of a three-year window free of the tax for those who buy new or previously unoccupied houses, or buyers of any first homes, won’t compensate for the loss of mortgage interest reliefs, it is argued.
Buyers of houses worth up to €300,000 may make a saving of just about €1,200 in all, from this three-year exemption.
Those downsides were among the reaction to Budget 2013 from the buying, building, and property sectors, who argued the budget would delay the recovery of the house market — which, Finance Minister Michael Noonan yesterday said was showing the first signs of stabilisation after six years of falls.
On the macro level, the introduction of Real Estate Investment Trusts (REITS) was widely welcomed as facilitating large asset sales, benefiting Nama and Government coffers, and bringing liquidity and international transparency to the commercial property market.
“It has been an open secret that dozens of potential investors are sitting on the sidelines waiting to pounce on Irish property assets. These proposed measures on REITS will bring Ireland into line with international standards. It will make it easier for those investors who wish to buy into a portfolio of properties to do so and should help stimulate a recovery in the commercial property market,” said accountant Padraic Whelan of Deloitte.
Chartered Surveyors (SCSI) said the details on REITS — yet to be announced — would determine their effectiveness, and regretted the lack of any new initiatives to stimulate the construction sector. International property agents Knight Frank said the three-year property tax exemption for buyers of new and unoccupied houses, allied to the €2bn allowed to Nama to complete estates, would help clean up ghost estates.
Surveyors in SCSI, Lisney and auctioneers’ body IPAV, argued the time-window exemptions should have been provided for those who paid high levels of stamp duty during the housing boom in the mid 2000s.
According to IPAV, there was no stimulation of the property market, and the ending of mortgage interest relief for house buyers was regrettable.
MD of Myhome.ie Angela Keegan noted “the increase in activity we have seen this year has been primarily fuelled by first-time buyers. While first time buyers will be exempt [from the new tax] until 2017, it in no way compensates for the loss of tax relief at source and we feel this could threaten the continuing stabilisation of the property market”.
Elsewhere, the fact that property owners — rather than occupiers — were liable for the new property tax (0.18%, and 0.25% on any value over €1m, with values and rates fixed for the coming three years) was disappointing, as occupiers benefited from local services who would be recipients of the new tax income.
This could drive rents up, warned the SCSI, while IPAV, Myhome, and the new Property Industry Ireland group joined critiques which said including rental income for PRSI liabilities from 2014 would discourage landlords and property investment, creating shortages of rental stock.