Dáil Éireann debate -
Wednesday, 25 Oct 2000

Vol. 524 No. 6

Written Answers. - Stamp Duty.

Paul Connaughton

Question:

202 Mr. Connaughton asked the Minister for Finance if he has satisfied himself that, as a result of the third Bacon report the stamp duty on second-hand houses, having been raised from 3% to 9%, is having a negative effect on construction work in the Border, midlands and western region; and if he will make a statement on the matter. [23540/00]

Minister for Finance (Mr. McCreevy)

It is assumed that the Deputy is referring to the increase in stamp duty on investors purchasing houses. In the case of such investors, the position was changed as follows in the Finance (No. 2) Act, 2000:

House PriceThresholds	Rates prior to Finance (No. 2) Act 2000 for investors purchasing new and second-hand houses	New Rates for Investors introduced in Finance (No. 2)Act, 2000
Up to £60,000	Nil	9%
£60,001 to £100,000	3%	9%
£100,001 to £170,000	4%	9%
£170,001 to £250,000	5%	9%
£250,001 to £500,000	7%	9%
Over £500,000	9%	9%

As the Deputy is aware, the context for the recent taxation measures on housing, including these stamp duty measures, is the difficult housing market situation. These market conditions, which are fully elaborated on in the most recent study into the housing market by Peter Bacon & Associates, Economic Consultants, required prompt action. In particular there was a pressing need to strengthen the position of first time owner-occupier buyers compared to investors. The third Bacon report pointed to speculative demand which was helping to drive up housing prices. The restructuring of the stamp duty regime to benefit owner-occupiers as against investors is one of the measures designed to help first time and other owner-occupier buyers.

The 9% stamp duty rate now applies to all categories of investors buying new or second hand residential property. The increase in the rate payable – compared with the previous rates that applied – will of course depend on the price of the house. The Government decided to apply this flat rate of 9% to all non owner-occupier purchasers of new, and second-hand, residential property, irrespective of the value of the property, as it was considered that the previous graduated scale of rates might encourage investments in the lower end of the market. This would not be a desirable development from the point of view of the first-time owner-occupier purchaser as it would bring further pressure on prices at the lower end of the market.

I consider that the latest package of measures should assist in restoring balance in the housing market and curbing price increases. This price moderation is in the interests of all in the property sector whether first-time buyer, owner-occupier or investor.