There are many alterations in the Budget in respect of property and so Aishleen O’Toole of REA Seamus Carthy has summarised those that will directly affect property.
1: Stamp duty on commercial property to triple: the decision to increase the rate of stamp duty on commercial property deals was not a welcome move. It will instantly in avertedly negatively impact the amount a purchaser will pay for a property.
The increase from 2% to 6% – from midnight on 10th October – will have a direct impact on pension funds and the many institutional buyers who have been key to the recovery of the sector over recent years.
“Unexpectedly trebling transaction costs in this manner is clearly unwelcome” she said.
The Governments rationale behind this rise is to stabilise commercial development. As there is a distinct lack of residential building and labour to accommodate this building the Government believe that if they can take the steam out of commercial development and shift it into residential development this may ease the housing crisis.
However, there is an opinion that the industry has already moved into a more normalised environment of lower trading activity.
Minister for Agriculture Michael Creed later clarified that agricultural land would be taken out of this category however this issue remains to be fully clarified so it is still unclear whether agricultural land will remain at 2% or increase to 6%.
2: Residential developments: commercial land purchased for residential development will be eligible for a stamp duty refund scheme, subject to certain conditions.
The conditions will include a requirement that developers will have to commence the relevant development within 30 months of buying the land.
3: 1.8 billion for housing next year: the Government are pledging almost €2 billion additional expenditure broken down into increases to the Housing Assistance Payment (Hap) scheme and funding for direct builds of new social houses.
The Housing Assistance Payment (HAP) is a form of social housing support for people who have a long-term housing need. You must be on the local authority’s housing list – which means that you qualify for social housing support.
Some of these initiatives will not kick in until 2019.
4: Home Building Finance Ireland (HBFI): up to €750m of the Ireland Strategic Investment Fund (ISIF) will be made available for commercial investment in housing finance.
The funds will be made available to a new vehicle to be known as Home Building Finance Ireland (HBFI). This new entity will be managed by NAMA and will provide cheap loans to builders.
The lack of access to building finance at viable rates of interest rates has been one of the top impediments to house building.
HBFI will increase the availability of debt funding on market terms to commercially viable residential development projects whose landowners want to build homes.
5: Vacant Site Levy to more than double: the vacant site levy is to be more than doubled, rising from the current 3% rate that applies in the first year to 7% for the second and subsequent years.
This will mean that any owner of a vacant site on the register who does not develop their land in 2018 will pay the 3% levy in 2019 and then become liable to the increased rate of 7% from 1 January 2019.
If landowners continue to hoard land in 2019, they will pay 7% in 2020, resulting in an effective vacant site levy of 10% over the two years.
6: Landlords-Deduction for pre-letting expenses: new income tax deduction for pre- letting expenses to encourage property owners to make residential properties available to rent.
If a property requires repairs prior to letting a landlord can claim up to €5,000, provided the property is let for a period of 4 years after works have been undertaken.
If the property is not rented for 4 years a tax claw back will be applicable. This relief will cease in 2021.
7: Capital Gains Tax: reduction in seven-year period for owners to enjoy full relief from Capital Gains Tax to four years for properties purchased between 7th December 2011-31st December 2014.
Capital Gains Tax (CGT) is a tax charged on the capital gain (profit) made on the disposal of any asset. It is payable by the person making the disposal. The gain/profit (the difference between the price you paid for the asset and the price you sold it for) is considered taxable income.
The relief did not apply if a property was sold within 7 years of its acquisition; this period has now reduced to 4 years.
8: Mortgage Interest Relief: mortgage interest relief will be cut next year in a move that will affect about 300,000 homeowners.
The relief for people with loans from 2004-2012 is being continued to 2020, but at just 75% of the rate in 2018, 50% in 2019 and 25% in 2020. The value of the relief is based on the amount of interest that you pay in a tax year on a qualifying mortgage loan.
Should you have any queries in relation to aspects that may affect you in the budget please contact Aishleen O’Toole or Seamus Carthy of REA Seamus Carthy on 090-663 0001 or email info@reacarthy.ie.
