Frances Fitzgerald
Question:53 Ms F. Fitzgerald asked the Minister for Finance if he will reduce stamp duty for first time home buyers. [13034/97]
Written Answers. - Stamp Duty.
The Deputy will be aware that for the purpose of encouraging home ownership the State provides considerable assistance towards the purchase of private homes. There are a number of important reliefs and exemptions from stamp duty on house transfers which are primarily aimed at assisting house buyers to purchase new homes. There is a full exemption from stamp duty for purchases of new houses with a floor area of below 125 square metres. This exemption is estimated to have cost between £50 and £55 million in 1996. Purchases of new houses with a larger floor area attract stamp duty based only on the site value, subject to a minimum site value of one-quarter of the full house (plus site) value. The relief in respect of these larger new houses is estimated to have cost approximately £6.5 million in 1996. The targeting of these stamp duty reliefs in favour of new houses takes account, inter alia, of the fact that most new house sales are subject to VAT at 12.5 per cent, whereas sales of second-hand houses generally are not. These reliefs are also designed to encourage the building of new houses, and thereby to support employment in the construction industry.
There is also 100 per cent mortgage-interest tax relief for first-time buyers of both new and second-hand houses and a reduced rate of relief for other mortgage holders. In addition, there is a generous £3,000 new house grant available for first-time buyers of new houses. All these exemptions-reliefs and grants help to moderate the cost of housing generally and play an important role in promoting employment within the construction sector.
In relation to further reductions in the rates of stamp duty it is by no means certain that such reductions would be passed on to the purchaser of a property, particularly in the current buoyant property market. The likelihood is that, in such circumstances, reductions in stamp duty would accure largely to those selling secondhand properties and would not benefit home buyers. In fact, I believe that the current levels of stamp duty on the transfer of secondhand houses serve, to a very real extent, to protect the housing market against property speculation. This is supported by commentators within the property market itself.
Finally, in framing policy in this area the Government must have regard to the budgetary implications of changes in the stamp duty code. Stamp duty on the transfer of land and buildings is a very important source of Exchequer revenue and in 1996 the estimated yield from this source was over £194 million. The yield from stamp duty represents a large component of the overall yield from capital taxes and makes a very significant contribution towards the cost of implementing the Government's important social and economic programme. Introducing an exemption from stamp duty for first time buyers of second-hand houses would be very costly and could be of the order of £30 million per annum. Consequently, I have no plans at present to introduce further reliefs in this area.