In his initial budget announcement, Finance Minister Jack Chambers emphasised the urgency to inspire young individuals with the assurance that fiscal strategies will assist them in becoming homeowners. This continues to be a major challenge for the government, with elections on the horizon. So the question remains, to what extent will these policies enhance housing availability?
The focus is on increasing expenditure to construct more houses and the necessary water and electricity infrastructure that supports housing, while simultaneously enlarging schemes that assist buyers and renters. The Help to Buy Scheme is extended until the decade’s end, with an increase in the rent tax credit as well.
The £7.8 billion housing package encapsulates £3.1 billion in exchequer funding. An additional £1.25 billion is allocated to the Land Development Agency for construction on State-owned lands, with a further £1.65 billion funneled to the Housing Finance Agency to provide loans to local authorities and approved housing bodies.
Moreover, this package comprises over £2 billion for the creation of 10,000 new social dwelling spaces and nearly £700 million for the development of 6,400 so-named “affordable” homes. Despite these sizeable numbers, housing activists argue that more is still required. Wayne Stanley, representing the Simon Communities, claimed the amount was simply inadequate, advocating for the goal of social housing to be raised to 15,000 in place of the current 10,000-home allocation.
Nonetheless, if these initiatives signify a perpetuation of existing strategies, now with more backing, tax alterations introduced by the new Minister have proven unpopular with the property sector. Chambers increased stamp duty rates in an effort to ward off professional investors. He plans to impose additional taxation on buyers within the market’s uppermost echelons.
The stamp duty rate rises to 15 per cent from 10 per cent when purchasing ten or more properties, the intention being to encourage new homeowners and first-time purchasers rather than wholesale buyers. However, Savills, the estate agency, argued this reform was more liable to undermine investor belief with ongoing arguments about rent limits, rather than meaningfully redirect supply.
This, nevertheless, is a compromise the government is prepared to make.
Chambers has introduced a new stamp duty rate of 6 per cent for properties over €1.5 million, still keeping the existing 1 per cent rate for properties up to €1 million and 2 per cent for those ranging between €1 million and €1.5 million. This fresh “mansion tax” will not burden first-time purchasers and is estimated to yield a modest €80 million annually, which means it won’t bring in significant revenue. However, it might irritate some of the government’s wealthier supporters.
John McCartney, director of research at BNP Paribas Real Estate Ireland, wondered why the government would take this step if not for public perception. He said people might not empathise much with those trying to sell high-value properties, even more with this levying transfer tax, which adds to the inherent difficulty that sellers usually face due to the limited pool of potential buyers.
Moreover, Chambers escalated the tax on unoccupied homes to seven times the property’s existing basic local property tax rate with the primary intent to motivate homeowners to rent these properties out rather than to increase tax revenue. The estimated annual yield from this is roughly €1 million.
Chambers is also proceeding with the residential zoned land tax, a divisive measure aimed to prevent landowners from hoarding land, which was delayed a year back. Local authorities will consider requests to continue existing economic operations at properties that have been rezoned as residential. Essentially, this means that if farmland earmarked for housing is subsequently rezoned for farming, it will remain untaxed.
Furthermore, legal changes will put off tax liability for 12 months between the provision of planning permission and the onset of development. Third party legal reviews of planning decisions will also exempt properties from taxation.
In the midst of ever-increasing house prices due to booming economy, these small but progressive measures are aimed to steadily stabilise the system.