Property consultants CBRE have welcomed the Government's decision not to review rent review provisions in existing business leases in today's Budget.
However, they said that the single most significant announcement for the property sector in today’s Budget is the announcement from Government that they will not now be proceeding with plans to retrospectively review rent review provisions in existing business leases as they had proposed in the Programme for Government.
The property consultants say that the uncertainty that this proposal created has effectively stalled activity in the investment sector of the Irish market for the last 12 months.
Confirmation that this legislative change will now not proceed, together with the reduction in the rate of stamp duty on commercial property transactions will, according to CBRE, stabilise the commercial property sector and ensure that entities such as NAMA and banks can now start disposing of investment properties.
According to Marie Hunt, Executive Director at CBRE, Dublin: "We broadly welcome the confirmation from Government that they now no longer intend implementing retrospective legislation with regard to rent review provisions in business leases.
"This was clearly the single biggest obstacle to transactional activity in the investment sector of the market over the last 12 months and we are happy that this has been cleared up today.
"The removal of this uncertainly along with the reduction in stamp duty for commercial property and capital gains tax changes for properties purchased over the next two years will enable transactional activity to resume in this sector of the economy."
However, the property consultants expressed disappointment that the Budget measures are unlikely to stimulate job creation or boost economic growth to any significant degree.
They were particularly critical of the decision to increase the rate of VAT from 21% to 23%, a measure they say will put "further undue pressure" on the retail sector of the economy.
The property consultants were however encouraged to hear the Minister re-state the Government’s commitment to retaining the corporate tax rate of 12.5%.
One of the measures announced in the Budget which will have significant implications for the property sector is the reduction in the rate of stamp duty on commercial property purchases from 6% to 2% from midnight tonight.
CBRE welcomed the reduction saying that implementing this change at this point in the property cycle is "an astute move" by Government.
CBRE also broadly welcomed the decision by Government to waive capital gains tax for commercial properties purchased between now and the end of 2013, another measure which they believe will help stimulate much-needed transactional activity and help stabilise values in the commercial property sector of the economy.
CBRE said it is imperative that the Government ensure that representatives from the property industry are involved in the expert group on the implimentation of the €100 household charge.
CBRE expressed surprise that residential investors who already pay a second homes charge now appear to also be liable for the €100 household charge for every property they own, not just their principal private residence.
They said: "When you consider that owners of residential properties will potentially be liable for PRSI on rental income from 2013 onwards, this is a body blow to many residential investors who are already struggling with unaffordable mortgage repayments."