Caroline Kirrane of APP Kirrane auctioneering has taken a look at the Budget and the items that will have an affect or benefit to the property market.
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 purchasing the lands.
Stamp duty on commercial property
The rate of stamp duty on commercial property will increase from two per cent to six per cent from midnight on October 10. This will have a direct impact on pension funds and the many institutional buyers who have been a vital part of the recovery of the sector. The Government's rationale behind this massive increase 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 level out the commercial development and steer the development to residential development this may ease the housing crisis. Minister for Agriculture Michael Creed has clarified that agricultural land would be taken out of this category but this remains to be fully clarified. Therefore it hopefully will not affect the purchasing and selling of farm holdings.
€1.8 billion for housing in 2018
The Government is allocating an additional €1.8 billion to the Housing Assistance Payment (HAP ) scheme and funding for direct builds of new social houses. The Housing Assistance Payment is a form of social housing support for people who have a long term housing need. To qualify one must be on the local authority housing list.
Home Building Finance Ireland (HBFI )
A total of €750 million of the Ireland Strategic Investment Fund (ISIF ) will be made available for commercial investment for house finance. The funds will be made available from Home Building Finance Ireland (HBFI ). This is a new entity that 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.
Mortgage interest relief
This will be cut in 2018. The relief for people with loans for 2004 to 2012 will be continued until 2020 but at just 75 per cent of the rate in 2018, 50 per cent in 2019, and 25 per cent in 2020. The value of relief is based on the amount of interest that you pay in the tax year on a qualifying mortgage loan.
Vacant Site Levy
This levy is going to double increasing from the three per cent rate that applies in the first year to seven per cent 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 three per cent levy in 2019 and then become liable to the increased rate of seven per cent for January 01, 2019. If landowners continue to hold onto the undeveloped land they will be liable to pay seven per cent in 2020 resulting in an effective vacant site levy of 10 per cent over the two years.
Landlords - deduction for pre-letting expenses
A new income tax deduction for pre-letting expenses has been introduced 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 four years after works have been undertaken. If the property is not rented for four years a tax claw back will be applicable. This relief will cease in 2021.
Capital Gains Tax
This tax is charged on the capital gain made on the disposal of any asset. It is payable by the person making the gain (selling the property ). The profit is considered taxable income. The relief did not apply if a property was sold within seven years of its acquisition, this period has now been reduced to four years.
For further information or to discuss your options contact APP Kirrane auctioneering, 16B Sandyford Business Centre, Bohermore, Galway, call 091 705555, or email [email protected].