Real Estate and Housing

Key measures
 

1. Stamp Duty on Residential Property – Increase
   A new 6% rate will apply to residential property transfers for the element of consideration above €1.5m. The 1% rate will continue to apply to the first €1m with the 2% rate applying to the value >€1m but <€1.5m. It is understood that the intention is that the new 6% rate should apply to the purchase of a single house or apartment (e.g., as opposed to an apartment block) and it is hoped that this will be clarified in the Finance Bill.
2. Stamp Duty on Bulk Purchases of Homes - Increase
   The existing rate of 10% on the purchase of 10 or more residential units to be increased to 15%.
3. Help-to-Buy (“HTB”) Scheme - Extended
   HTB is to be extended until the end of 2029. 
4. Residential Zoned Land Tax (“RZLT”) – New Exclusion/Deferral
   An exemption is to be introduced in 2025 for landowners who seek to have their land rezoned to reflect the genuine economic activity they carry out on their land. 
5. Pre-Letting Expenditure on Vacant Premises - Extension
   The scheme is to be extended for a further 3 years until the end of 2027.
6. Vacant Homes Tax (“VHT”)
   The VHT rate is to be increased from 5 times to 7 times the existing LPT rate of a relevant property.
7. REIT and IREF Tax Regimes
   No new measures announced. 
8. Funding for the Land Development Agency (“LDA”), Irish Water and the Electricity Grid
   Irish Water is to receive a €3bn capital investment on capital projects including new homes connections and wastewater improvements. The LDA is to receive €1.25m to fund the delivery of affordable homes. A further €0.75m is to be invested to upgrade the national electricity grid.

Our view

The changes in the rates of stamp duty are the fourth and fifth changes respectively in 7 years. Both stamp duty changes are effective from midnight tonight.

Ultimately, there is an acknowledged significant private funding gap in the development of new homes and today’s stamp duty changes do not encourage the closing of this gap. We believe a long-term plan is needed which provides certainty of policy for a specified period of time to underpin longer term investment in Irish property.

The announcement of the extension of the HTB is significant and will be positive news for both first-time buyers and new home builders. The intention would appear to be to maintain the scheme in its current form with no significant amendments.

The RZLT was one of the most contentious subjects in the weeks preceding the Budget. The economic activity exclusion announced would appear to be the mechanism being made available to address the much-publicised active farmer concerns. Supplementary commentary provided with the Budget also appear to signal the Finance Bill will include:

• a 12 month deferral of the RZLT liability between the grant of planning and commencement of development (no such deferral currently)
• an exemption during judicial review proceedings brough by a third party (this is currently addressed via a deferral rather than an exemption)
• unspecified additional technical amendments

At a budgeted cost of €2m per year, the continuation of the potential relief for certain pre-letting expenses for landlords (€10,000) is a welcome albeit lacking scale contribution to the investment landscape.

Overall, the Government has chosen direct capital investment rather than tax incentives to drive the much-needed increases in new housing delivery. While the need for the €3bn capital infrastructure investment is understood and seeks to address a key blocker to housing delivery, it remains to be seen whether this may be seen in the future as a missed opportunity in some respects, in that more has not been done to incentivise additional private investment.

We await the Finance Bill for further detail on today’s announcements.