BUDGET: WISH LIST:Estate agents say that the Government has made money from the property market for a long time and now they want it to give something back, in the Budget
HARD-PRESSED estate agents across the country are hoping that next week’s emergency Budget brings some relief for home buyers with an easing of the stamp duty regime. The Irish Auctioneers Valuers Institute (IAVI) has called on the Government to introduce measures to revive the ailing market, with some members having strong views on what the Budget should bring on April 7th.
“It’s been extremely unfair of them to abandon the property market,” says estate agent Conor Gallagher, a partner at Douglas Newman Good. “Stamp duty has been a cash cow for the Government for years and they milked it and now it’s time to give property a break.”
There should be some relief on VAT on new homes, he says. “If the Government sells a house for €500,000, it automatically gets 13.5 per cent which works out at €65,500. There are a lot of new houses sitting around the country with the VAT locked up. Why not give a grant to any buyer of half that VAT amount, 6.75 per cent, whether they are first or second-time buyers or investors, to incentivise the market. It would make buying property more attractive, put money back in the economy and create a bit of confidence.”
According to Ken MacDonald of Hooke MacDonald, stamp duty should be halved for the rest of the year, and that a deposit “top-up” of €7,000 should be given to first-time buyers to help them bridge a gap between a mortgage and the purchase price.
“Prices have come back by 40 per cent so affordability has been restored,” he says. “I believe the Budget could generate significant income for the State and help restore a healthy economy if measures are adopted to stimulate transactions in both the new and second hand markets.”
Simon Ensor, a director of Sherry FitzGerald, believes the Government will hold off on any changes in stamp duty until the December budget when he expects property tax to be reintroduced on principal homes. “They are not ready yet to bring back RPT. It is still being formulated. However, when they do introduce it they will have to offer a trade-off by reducing stamp duty,” he says.
Although there have been rumours of a stamp duty “holiday” for the rest of the year, Ensor isn’t sure that it would work. “Would it kick-start the market? I’m not sure. Taking 7 per cent off the upper end, and 4 per cent off the middle range isn’t that enticing, with prices dropping as they are. Prudent negotiations will get you that discount anyway.”
However, according to Conor Gallagher, incentives to encourage older buyers to trade down could be introduced to get things moving.
“If you have a retired couple with a house worth €1 million and they buy a smaller one for €500,000, they have to pay €25,000 in stamp duty.
“Over 65s could be means-tested and some could be exempt from stamp duty. If they have €500,000 left from the sale of their house, they might well do what other people do and give some of it to their children to help them out so the money goes back in to the market.”
Limerick estate agent Des O’Malley jnr says he doesn’t “want or expect” any measures to be introduced in the Budget to stimulate the property market. “I think property has been marginalised in terms of revenue as a tax-take and I don’t think it’s relevant to this Budget.”
He says it looks as if the market has “corrected” itself pricewise and any “artificial remedies” will only boost it for a temporary period. He believes house prices have dropped in the order of 40 per cent and that most of the property price indices are “out of date” and under-estimating the drop. “The main problem is the banking situation but that is not going to be resolved in this Budget.”
Stamp duty doesn’t generate enough money “for it to be relevant”, says O’Malley. “I believe the market will get going itself eventually of its own volition. The Government should sort out our banking issues which would solve problems in the property market and a few other things besides.”
But the IAVI says any hope of activity in the market will be “quashed” if a property tax is introduced in addition to the current penal stamp duty rates. While the IAVI has lost some 5 per cent of its peak membership of 2,000 in the last year, a spokeswoman for the institute says it has retained most of their members, “even the ones who have lost their jobs and are working in other industries; by allowing them to continue as members on a low-fee basis or by subsidising them altogether”.
It is asking for “any move” to ease access to reasonable levels of finance and improve people’s ability to buy property, including reform of VAT.
“The whole VAT thing is a fiasco,” says Paddy Jordan of Jordan Auctioneers in Kildare who says it has led to “a huge amount of money going north of the Border”.
Jordan suggests a re-introduction of the roll-over relief on Capital Gains Tax (CGT) on land and businesses. “In the old days if a person sold a pub to buy a bigger pub there was relief on CGT provided they re-invested it in the same business. The market certainly needs to be stimulated,” says Jordan.
If the Government doesn’t take action “we are all bunched. There is no trade out there at the moment and everybody is a bit scared about what is going to happen in the Budget”.
Francis Heaslip of Property Partners Heaslip in Galway is more optimistic; he believes the Government will do something to stimulate the market in the Budget. “If they don’t the whole industry will be at a standstill.”
