STAMP DUTY:YESTERDAY'S BUDGET produced some good news at last for the beleaguered property sector. Stamp duty rates are to be cut to 1 per cent on properties up to €1 million and 2 per cent over that figure.
The new regime will mean that stamp duty will plummet for existing homeowners who wish to trade up or simply relocate, particularly those at the upper end of the market who previously faced a top rate of 9 per cent on homes valued at over €1 million.
First-time buyers however will return to paying stamp duty for the first time in a number of years. Previously, first-time buyers paid no stamp duty on either new or second-hand properties.
The change, which was generally anticipated, comes at the end of one of the slowest years for house sales – one Dublin agency admitted yesterday it has only handled three house sales since last January.
The change means that a purchaser buying a €600,000 house will now have to pay €6,000 in stamp duty compared to €33,250 under the old regime. For the average house – now calculated to be worth €240,000 by the Economic and Social Research Institute – stamp duty will cost €2,400 reflecting a saving of €5,650.
The Government is hoping to kick-start the market to establish true values before a new property tax is introduced.
In the last two years the very low level of transactions has made it difficult to get an accurate picture of property values which have slumped by between 40 per and 50 per cent, and in some cases by considerably more.
The changes are effective as of today, and come at a time when there is a record number of properties overhanging the market. Both new and second-hand homes have been slow to sell with buyers waiting for the bottom of the market, and mortgages difficult to secure.
“This is undoubtedly good news for the property market,” said Marian Finnegan, an economist with Sherry FitzGerald, the country’s largest estate agency chain. “Stamp duty had been 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, thankfully the Government has recognised this.”
According to Keith Lowe, director of the Douglas Newman Good chain, the new rates will allow people to trade up and down at far less cost. “It is also likely to encourage people in rental accommodation to purchase a home in the coming months,” he said.
Estate agent Vincent Finnegan said the decision to keep the 1 per cent rate below €1 million was likely to lead to “some fancy footwork with deals on the border-line”.
Rachel Doyle, director of PIBA Mortgage Services, said the changes would go some way towards assisting the property market for anyone other than a first-time buyer. “For first-time buyers it will be an extra cost inhibiting those wishing to get onto the property ladder, particularly at a time when acquiring lending is extremely difficult.
“Taken with the abolition of mortgage tax relief it is a yet a further impediment for first-time buyers. In a sense it is one step forward and two steps back,” she said.
The chief executive of the Institute of Professional Auctioneers Valuers (IPAV), Fintan McNamara, said the old stamp duty levels had been a barrier to labour mobility. However, he warned that future activity in the property market was totally dependent on banks providing more lending.
