A new flat rate of stamp duty on property transactions is to be introduced with immediate effect.
There will be a flat rate of 1 per cent on all residential property transactions up to a value of €1 million, with 2 per cent applying to amounts above €1 million.
All existing reliefs and exemptions for stamp duty on residential property will be abolished. This means that 1 per cent will be paid on all residential property sales, new or old.
Minister for Finance Brian Lenihan said that if this system “had been in place instead of the previous volatile one, it would have lessened the effect on tax revenue of the booms and busts in the market.”
The new rates will apply to property transfers on or after December 8th.
Provisions will be put in place to ensure that anyone who has entered into a binding contract to purchase a house before December 8th, and who completes the transfer of that property before July 1st, 2011 will not lose out.
He said the changes in stamp duty had three aims: to stimulate the property market, to provide necessary valuation information and to increase market transparency for the smooth operation of the market.
Mr Lenihan also announced changes to the tenant purchase scheme by introducing a higher discount for existing tenants.
They will be able to avail of a discount of up to 45 per cent on the market price of a house they are eligible to purchase under the scheme. This is a temporary increase from the maximum 30 per cent discount normally available.
Under the current arrangement this 30 per cent discount is accumulated over a 10 year period at a rate of 3 per cent for each year of the tenancy. The revised temporary arrangements will allow tenants to accumulate the 45 per cent discount over a 15 year period, also at a rate of 3 per cent for each year of the tenancy. The revised arrangements will therefore be of particular benefit to long-term tenants.
Full details of the scheme will be made available in the coming weeks to permit the expanded scheme to be introduced from 1 January next.
Joan Henry, head of research at Savills Ireland said the new rate of stamp duty was "great news" for the market.
“Effectively stamp duty is gone, at 1 per cent up to €1 million and 2 per cent over €1 million. It will allow potential buyers who have been on the fence to avail of the very significant reduction in prices in recent years," she said.
She envisaged activity in the property market increasing in 2011.