Getting ready for the NAMA tornado

THE proposed windfall tax of 80%, which was included as part of the NAMA legislation, has created its own mini tornado following a clarification when it passed through the Senate.

First to make the hue and cry were the farmers, who saw the increase from 20% capital gains to 80% on zoned land as a cap on their equity.

The issue of Compulsory Purchase Orders and the sale of residential housing sites were used to highlight what the IFA describes as ‘crude legislation’ which, it says, will be counterproductive and yield little tax revenue. Instead, It is proposing a scaled rate whereby the 80% CGT would only apply to gains over €5 million.

IFA also propose an exemption threshold of €500,000 and a rising scale from €25% upwards, linked to the size of the gain.

Meanwhile, the Greens’ implementation of the Kenny Report has also caused ripples in the wider property area.

Auctioneers CB Richard Ellis (CBRE) point out the devaluing effect of the windfall tax in respect of land purchased for ‘hope value’ which under the new system would have an immediate devaluation. Likewise for land, such as that with industrial zoning that may have residential potential, this would have its value reviewed, the agent says, and as such, could create problems for any valuation under NAMA.

The issue of upward-only rents also came into play in the context of valuations, where properties would have an immediate devaluation in light of the removal of upward-only rent reviews.

“The property industry is already grappling with preparing accurate valuations for development land transferring to NAMA against a backdrop of virtually no transactional evidence,” CBRE says, “and this proposal is only going to make this process even more difficult. It will have particularly severe implications for un-zoned land.”

However, other property commentators dismiss fears of devaluation by the windfall tax in the NAMA context, saying much of the land being taken into NAMA would have been purchased prior to the height of the boom and would not have a 100% loan book value.

The country’s top 20 property portfolios are being valued at present and will by taken into NAMA by January – this cohort represents 50% of the country’s borrowings.

The remainder of the larger assets will be completed by July of this year, as NAMA is driving the process through swiftly.