Dáil Éireann díospóireacht -
Tuesday, 23 Oct 2001

Vol. 542 No. 5

Written Answers. - Stamp Duty.

Enda Kenny

Ceist:

271 Mr. Kenny asked the Minister for Finance his views on the effect of the 9% tax on second houses; if he considers the arrangement to have been beneficial to home ownership and the construction industry; and if he will make a statement on the matter. [25319/01]

Minister for Finance (Mr. McCreevy)

In the Finance (No. 2) Act, 2000, I made significant changes to the stamp duty regime on transfers of residential property arising from the recommendations of the third Bacon report into the housing market. The Act introduced a three tiered stamp duty structure for first time buyers, owner occupiers other than first time buyers and investors. Many first time owner occupier buyers of second hand houses are now either exempt from stamp duty or pay at a reduced rate. However, owner occupiers, who are not first time buyers, also benefit generally from the revised stamp duty rates

The Act introduced a flat 9% stamp duty rate on all categories of investors buying new or second hand residential property. In the light of developments in the housing market since last year, the Government decided to reduce the rate of stamp duty for investors in new property from this flat 9% and an amendment to this effect was introduced on Committee Stage of the Finance Bill 2001 which applies to conveyances made on and from 27 February 2001. However, the investor rate for second hand properties remains at 9%.

Among the reasons for the change in investor rate of stamp duty for the purchase of new prop erty in the Finance Act, 2001, was that the imposition of the 9% flat rate on non-owner occupied residential properties had resulted in some negative impact on developers and potential investors. There was evidence that this could have had adverse consequences on the prospects for overall housing supply and particularly for apartment developments, because reduced investor demand makes apartment developments unviable. There was also evidence that applications were being made to local authorities for a change in planning permission from residential to commercial.

The change to the stamp duty regime left the investor rate unchanged in the second hand market while reducing it for new property, thus providing a supply incentive in this area. Limiting the concession to new housing maintains the relative advantage of first time purchasers in the second hand market which accounts for two thirds of first time purchaser transactions.

It is interesting to note that new house completions are up by 4.8% in the first eight months of this year compared with the same period last year. At the same time the estimated stamp duty yield from investors in respect of new housing was £7 million for the first nine months of this year – compared to £3 million for the whole of last year from investors and owner occupiers alike. These data represent good news for both new home owners and, by extension, the housebuilding sector.

I have no plans, at present, to introduce any further changes to the stamp duty structure. However, the position will be kept under continuous review in the light of developments in the housing market.