Stamp duty reform seen as boost for second-hand housing

PropertyThe Government has given first-time buyers a major boost in the second-hand housing market by increasing the threshold above which they have to pay stamp duty by more than 66 per cent, from €190,000 to €317,500.

Up to now, first-time buyers of second-hand houses had to pay stamp duty of 3 per cent on properties priced from €190,501 to €254,000 and 3.75 per cent on properties ranging from that up to €317,500. Now, they will not have to pay any stamp duty on second-hand houses costing less than €317,500 and will pay reduced levels of stamp duty on purchases up to €635,000. The new rates are effective from today.

The changes are being welcomed by buyers and estate agents as it saves first-time buyers over €11,000 when buying the average second-hand house. This must be acknowledged as a generous provision in light of average second-hand property prices nationally, which stand at €303,148 for houses and €284,574 for apartments according to official statistics, said Alan Cooke, chief executive of the Irish Auctioneers & Valuers Institute (IAVI), commenting on the Budget measure last night. However, there is still some ground to be made up in the Dublin market, where the average price of a second-hand house is now around €400,000, he said.

The reaction from the property industry was predictably positive, with estate agents welcoming a move that gives house- hunters more spending power. "The announcement is very good news for first-time buyers and the property market alike," said Marian Finnegan, chief economist with the Sherry FitzGerald group, the country's biggest chain of estate agents.

Douglas Newman Good, another nationwide chain, said that: "The move to increase the stamp duty exemption threshold for first-time buyers in the second-hand market will be of great assistance to those purchasers looking to get on the property ladder."

Paul Murgatroyd, DNG's economist, points out, however, that "the change will create a much more competitive market in 2005 as the new homes sector and second-hand sector compete on a far more level playing field."

First-time buyers are exempt from stamp duty on new home purchases and this led to a bias in favour of the new homes market, with approximately 50 per cent of all new homes purchased by first-time buyers.

In contrast, the corresponding figures in the second-hand market is 33 per cent.

Property Consultants CB Richard Ellis Gunne praised the Government for its "sensible" approach to property matters in the Budget. "Property is fast becoming a very significant driver of the Irish economy and is an industry that should be nurtured rather than curtailed."

However, there was some disappointment that the Government made no move to reduce the 9 per cent stamp duty level on second-hand houses valued over €635,000.

This is seen as a punitive level that discourages homeowners from trading up.

The 9 per cent stamp duty rate - raised from 6 per cent two years ago - also applies to commercial property. Last night the Society of Chartered Surveyors, which represents the construction and property industry, said that stamp duty on commercial property acts as a major disincentive to activity in the Irish investment market and will lead to a continuing outflow of property investment funds to other markets.

This year Irish investors spent an estimated €2.5 billion abroad and only €800 million at home.