Written Answers. - Stamp Duty.
Louis J. Belton
Question:
381
Mr. Belton
asked the
Minister for Finance
if his attention has been drawn to the concern in relation to 9% stamp duty on new houses in rural renewal areas and the BMW region; if his attention has further been drawn to the fact that it is now having a devastating effect on development and is proving counter productive in bringing investors to those areas.
[23877/00]
The 9% stamp duty rate applies to all categories of investors buying new or second hand residential property. In the case of such investors, the position was changed as follows in the Finance (No. 2) Act, 2000:
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House PriceThresholds
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Rates prior to Finance (No. 2) Act 2000 for investors purchasing new and second hand houses
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New Rates for Investors introduced in Finance (No. 2) Act 2000
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Up to £60,000
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Nil
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9%
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£60,001 to £100,000
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3%
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9%
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£100,001 to £170,000
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4%
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9%
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£170,001 to £250,000
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5%
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9%
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£250,001 to £500,000
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7%
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9%
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Over £500,000
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9%
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9%
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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 increase in the rate payable by investors – 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.
Stamp duty is applied on a once-off basis only. It is applied on a class basis to a range of items, for example, to transfers of Irish shares, to mortgages, to non-life insurance policies as well as to property and is, therefore, not a taxation that lends itself to exemptions on a regional basis. Any attempt to introduce such an exemption would raise equity considerations concerning the tax treatment of individuals in different areas. There is also a serious risk that such an exemption could lead to distortions in the housing market. These could hinder the overall national goal of increasing the supply of new homes, especially to meet the needs of first time buyers who are trying to get a foothold in the housing market.
I consider that the latest package of measures should assist in restoring balance in the housing market and curbing excessive price increases. This price moderation is in the interests of all in the property sector, whether first time buyer, owner occupier or investor.
