Vol. 546 No. 4
87 Mr. N. Ahern asked the Minister for Finance the situation regarding persons who complain that first time house buyers were unfairly treated in the Budget vis-à-vis the investor; his views on whether this new measure will put pressure on first time buyers; if a reduction in stamp duty can be offered to them; and if he will make a statement on the matter. [32155/01]
As I stated in the budget, the presence of investors in the housing market is required to secure the future supply of housing to meet accommodation needs. Circumstances in the property market are much changed now as compared to the position in early 1998. The Government has always been vigilant in introducing and amending policies as necessary to deal with an evolving market situa tion. In this context the recent evidence of a slow down in house prices, accompanied by a fall in housing output, would have had serious implications for activity and employment in the house-building sector, for housing supply for purchasers, and for the supply of property for rent if not responded to by Government. It is particularly relevant to note that total housing output represents 11% of GNP and accounts for around 100,000 or more persons directly employed, not to mention those indirectly dependent on the sector. Furthermore, a decline in new house completions would have ultimately begun to put upward pressure on house prices again and a fall in housing output would have worsened conditions for both the first-time purchaser and the rental market and led to further upward pressure on rents.
The stamp duty changes that I introduced in the budget simply put investors in new and second-hand houses onto the same rate as non first time owner-occupiers – the advantage enjoyed by first-time buyers in the second-hand residential property market remains, as the table below confirms. Moreover, all owner-occupiers including first time buyers are exempt from stamp duty for new residential property under 125 square metres. In addition to the stamp duty changes mentioned above, I also have restored interest relief as a deductible expense in calculating tax on rental income from residential property with effect from 1 January 2002.
I do not consider that the new rates of stamp duty will put pressure on first-time buyers. The market for housing has benefited the latter as a result of the significant slowdown in the rate of house price increases and as a result of the cumulative beneficial effect of reductions in stamp duty payable by first-time purchasers during my time as Minister. However, one must strive at all times to maintain market equilibrium – changing stamp duty rates applying to residential property is always a balancing act since one has to have regard to the various participants in the market as well as to their needs while placing these in the context of the broad economic effect.
It is envisaged that the effect of the budget changes will be to contribute to the maintenance of employment in the housing construction sector, aided by increased investor interest; a stimulus to new house construction as the expected increase in activity in the second-hand property market, thanks to the abolition of the single 9% flat rate, has a beneficial knock-on effect on new house sales – many of which are bought by existing owner occupiers; and an increase in the quantity of property available in the rental market.
The current stamp duty rates payable on the transfer of new and second-hand residential property are as follows:
|
Price Band |
First time buyer/Other owner occupierNew property* |
First time buyerSecond hand property |
Other owner occupierSecond hand property |
New Rates for investors**New and second hand residential property |
|
Up to IR£100,000(Up to 127,000) |
Exempt |
Exempt |
Exempt |
Exempt |
|
IR£100,001 to IR£150,000(127,001 to 190,500) |
Exempt |
Exempt |
3% |
3% |
|
IR£150,001 to IR£200,000(190,501 to 254,000) |
Exempt |
3% |
4% |
4% |
|
IR£200,001 to IR£250,000(254,001 to 317,500) |
Exempt |
3.75% |
5% |
5% |
|
IR£250,001 to IR£300,000(317,501 to 381,000) |
Exempt |
4.5% |
6% |
6% |
|
IR£300,001 to IR£500,000(381,001 to 635,000) |
Exempt |
7.5% |
7.5% |
7.5% |
|
Over IR£500,000(Over 635,000) |
Exempt |
9% |
9% |
9% |
