Stamp Duty

By Michèle Horgan

BUYING a home can seem a bit daunting at first, but once you've set your sights on a property and have put in a bid, things really start rolling.

Preparing for the purchasing process can help to calm the jitters which all first-time buyers feel. And talking to someone who has just bought a house will shed some light on any worries you might have.

Start by finding a good solicitor through word of mouth. Bear in mind that the average price charged by solicitors is 1% of the purchase price, but considering the expense of homes in this country, this price can be negotiated.

The rates of stamp duty, levied by the Government, at present favour first-time buyers, and you'll be relieved to discover that first-time buyers don't have to pay any stamp duty on homes up to €190,500.

"A few years ago first-time buyers had to pay stamp duty on second hand homes in the lower brackets. This meant there was less demand for second hand homes among first time buyers, but this has now changed," auctioneer Lucy Wolfe pointed out.

Changes to the law in 2000 opened up the second hand homes market to first-time buyers, which came as a relief to auctioneers around the country.

Under the terms of the Finance Act 2002, first-time buyers have to pay 3% stamp duty on homes between €190,501 and €254,000, 3.75% on homes between €254,001 and €317,500, and 4.5% on property costing between €317,501 and €381,000.

Stamp duty is paid in one lump sum on the date of the purchase of the home. The money is paid through your solicitor who is responsible for forwarding it on to the Government.

Most first-time buyers find they're exempt from having to pay stamp duty, and since last December's budget, investors are also paying less stamp duty on homes at the lower end of the market.

Changes introduced in the budget have meant that investors and owner-occupiers pay the same rates of stamp duty. Before December, investors were paying 9% stamp duty on all properties.

"This was good news for the investor, but even better news was the fact that changes to the law made it possible to write off mortgage interest against rental income," said Ms Wolfe.

Under the terms of the budget, interest on borrowed money used for the purchase, improvement or repair of rented residential property could once again be written off as a deductible expense against rental income.

The return of the investor to the Irish property market has ensured that first-time buyers have been kept on their toes. And while auctioneers find there are slow sales in the upper brackets of the market, it's a consolation that property at the lower end is moving fast.

At present, owner-occupiers and investors pay no stamp duty on homes up to €127,000. From this figure upwards, stamp duty is paid on a sliding scale, starting at 3% and finishing at 9% for property worth €635,001 or over.

According to Ms Wolfe one of the reasons why property at the upper end of the market is slow to sell outside of Dublin is due to the high rates of stamp duty.

She believes that rates of stamp duty of 5% and over on homes from €255,000 to €500,000 are preventing home owners from trading up and making the market less buoyant.

Once a property changes hands, in order to register the transfer of the deed into a new name, there is a fee of approximately Euro 317 which needs to be paid to the Land Registry.

When deciding on which lending institution to choose, buyers are advised to check which fees apply. Generally charges include application, acceptance, administration and legal fees.

Banks and building societies also require a professional valuation of the property and depending on the condition of the residence, it may be necessary to undertake a structural review.

The fees charged by surveyors depend on the size and condition of the residence, but generally valuation fees start from Euro 127 plus VAT.

Your lending institution will insist on a level of property insurance which adequately reflects the value of your home. Life assurance is also a must and normally comes in the form of a mortgage protection policy.

The Department of the Environment offers first-time buyers a tax-free grant of Euro 3.800 on all newly-built homes of less than 125 sq metres. This is one of the reasons why demand for new homes went sky high in recent years.

But the introduction the year before last of 0% stamp duty for the first-time buyer on all homes up to Euro 190,500, both second hand and newly built, has meant less demand for new homes.

Auctioneers were pleased with the changes to stamp duty brought in by last year's budget. They were especially pleased with the re-introduction of interest relief on rental income.

And now that the lower end of the market is moving fast once again, people in the property business are keeping their fingers crossed for renewed buoyancy in all sectors.