Jim Mitchell
Ceist:165 Mr. J. Mitchell asked the Minister for Finance if he will now agree to reverse the increase in stamp duty and to re-instate mortgage interest relief for investors. [25636/01]
Written Answers. - Stamp Duty.
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. These resulted in reductions in stamp duty rates for first-time buyers in respect of houses up to £300,000 – 381,000 – in price, while other owner-occupiers also benefited from the rates revision at the lower end of the market.
That Act introduced a three-tiered stamp duty structure for first-time buyers, owner-occupiers other than first-time buyers, and investors. I increased the exemption from stamp duty from £60,000 – 76,200 – to £150,000 – 180,500 – in the case of first-time buyers and for other owner-occupiers to £100,000 – 127,000 – and reduced the stamp duty rates on transfers of residential property at the lower end of the market for first time buyers and other owner-occupiers in excess of these thresholds. In particular, the revised regime is structured to facilitate those who are trying to buy their first home and who are faced with particular difficulties in the market at the present time. Many first time owner-occupier buyers 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, as I have already indicated.
The Act introduced a flat 9% stamp duty rate on all categories of investors buying new or second-hand residential property. This did constitute an increase in stamp duty payable by those persons in respect of new property and in respect of second-hand property over £500,000 – 635,000. However, 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 remained at 9%. This change to the stamp duty regime leaves 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.
The position in relation to the tax treatment of the private rented accommodation sector is that the Finance (No. 2) Act, 1998, abolished the deductibility of interest for borrowings in respect of private rented residential accommodation purchased on or after 23 April 1998, subject to certain transitional provisions. The Act represented a significant part of the Government's package of measures aimed at addressing problems in the housing market. This approach was adopted on the basis of the report on house prices prepared by Peter Bacon and Associates. The measures in the Act were framed to address the situation identified in the report that investors were to some extent replacing first time buyers in the market, a development which was contrary to the thrust of housing policy over recent decades.
I have no plans at present to introduce any further changes to the stamp duty structure, nor in the provisions relating to interest deductibility on borrowings by investors. However, the position is being kept under continuous review in the light of developments in the housing market.