Govt 'should have cut stamp duty on residential properties'

Estate agents, Sherry FitzGerald, have welcomed the reduction in stamp duty on commercial property (down from 9% to 6%), but have said the Minister for Finance should have changed the rate of stamp duty for residential property.

Marian Finnegan, Chief Economist, Sherry FitzGerald Group said: "The reduction in the rate of stamp duty applicable to commercial property is a much-needed positive initiative which will allow a greater alignment between the Irish and international commercial investment markets."

Ms Finnegan also welcomed the increase in the rate of mortgage interest relief for first-time buyers, the extension of the existing local authority mortgage scheme and the introduction of the Government equity initiative.

However, Ms Finnegan expressed disappointment that the impact of such measures on the residential market is somewhat limited in that it does not enhance mobility.

Ms Finnegan said: "The increase in the rate of mortgage interest relief is a positive measure for first-time buyers. In essence a first-time buyer couple can reduce the cost of their monthly mortgage by up to €416 which, when combined with the more competitive mortgage rates in the market, is a very positive result and will enhance affordability for first-time buyers in the market place.

"Tthe introduction of the equity initiative, whereby the Government will assist those seeking affordable housing by taking an equity share, is also a very constructive measure in that it would appear to be designed to assist hard-pressed, first-time buyers onto the housing ladder.

However, Ms Finnegan went on to express disappointment with the Government's inaction on much-needed amendments in the rate of stamp duty for residential property in the Budget.

Ms Finnegan said: "The penalising rate of stamp duty applicable in the second-hand market is acting as a barrier to entry into the established property market and is in effect a tax on mobility. The decision to reduce stamp duty in Budget 2008 went some way to addressing this situation but it is clearly not far enough.

"Stamp duty was used by successive governments as a crude means of controlling demand, in a market where the demand for property significantly exceeded supply. Clearly we are now in a changed market place.

"In more challenging times it is incredulous that the Government should consider penalising hard-pressed citizens for making necessary life decisions such as moving home. The argument in favour of high rates of stamp duty has clearly been eliminated, and it is particularly disappointing that the Government failed to recognise this."