Surveyors call on Government to lower stamp duty

The outflow of capital to the UK and eastern Europe will continue unless the Government moves to reduce "exorbitant" stamp duty, according to the president of the Society of Chartered Surveyors. The high rate makes property investment products here too expensive.

SCS president Desmond Byrne called for a one-third reduction in the stamp duty rate while addressing the society's annual dinner in Dublin last Thursday. The current 9 per cent was too high and should be brought back into alignment with the UK's 6 per cent rate, he claimed.

Irish investors were putting funds directed towards property primarily in the UK and central and eastern Europe. They were turning their backs on Ireland because of a "lack of investment product in the national market", Mr Byrne stated.

One "obvious" reason for this "is the relatively high taxation transactional costs involved, and I refer primarily to the stamp duty rate of 9 per cent", he told assembled delegates.

"This is far too high, particularly when compared with the stamp duty rate in the UK. This should revert to its previous rate of 6 per cent and, in this way, I believe that a more national investment product would come to market," he stated.

A partner of commercial property consultants Druker Fanning & Partners, Mr Byrne told an audience of 1,200 that the prospects were good for 2005. The construction and property sectors "appeared to be positive with the retail sector going from strength to strength, a recovery in the office sector and residential performing exceptionally well".

He quoted figures from the latest SCS/IPD Index for the fourth quarter of 2004 that showed total returns on all commercial property of 11.5 per cent. "It is interesting to note that while 11.5 per cent is an average total return figure, when one considers the constituent parts of this figure, the retail area was the star performer at 17.9 per cent."

Grafton Street represented the jewel in the crown of retail, said Mr Byrne. "It is fascinating to note that Grafton Street has now been placed in fifth position of the top retailing streets in the world, marginally behind London's Oxford Street with current Zone A rental values at approximately €8,600 per square metre."

Office vacancy rates were down to about 13 per cent overall in the Dublin area, he said, while vacancy rates stood at about 8 per cent in the city centre.

A theme of Mr Byrne's talk was infrastructure. He supported the stance taken by the Institute of Engineers in Ireland in its submission to the Government on the need for continued heavy investment in infrastructure and the National Development Plan.

A slowdown in the "extraordinary" housing output seen during 2004 was predicted by senior economist Colm McCarthy, managing director and founder of DKM Economic Consultants. Mr McCarthy also expects a reduction in the State capital programme. "The current rate of housing output is just unsustainable. Our residential stock is growing far faster than the number of households in the country and an output level of around that achieved in 2002 (57,695) would be more than enough to cater for the underlying demand that arises from demographic factors," he said.

Less certain was when a slowdown might begin to dampen the market. "Clearly the market is being underpinned by cheap mortgage funds. A sharp correction is possible whenever the ECB commence the next upswing in European interest rates, not likely before 2006," Mr McCarthy said.