Auctioneers are expecting a burst of legal activity on Tuesday to get sales contracts on expensive homes signed before new stamp duty rates come into force at midnight.
However, while the introduction of a new 6 per cent rate on property values above €1.5 million caught the industry by surprise, it is considered unlikely to derail pending sales given the wealth at the higher end of the market.
When the changes come into force from Wednesday, the new stamp duty rate of 6 per cent will apply to the portion of property values above €1.5 million, alongside existing rates of 1 per cent up to €1 million, and 2 per cent on that between €1 million and €1.5 million.
Blindsiding the auctioneering industry during Tuesday’s budget, the measure has caused confusion as to its purpose, given the relatively low amount of potential revenue on limited transactions.
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“You’re going to get a flurry of activity in the legal profession this evening trying to exchange contracts where the buyer has already signed and the vendor was about to put pen to paper ... just like the rush to buy cigarettes before midnight, same principle,” said Paul Murgatroyd, director of research at property group DNG.
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However, Mr Murgatroyd felt it was unlikely other sales would fall through given the relative wealth at the higher end of the market, and the shortage of available properties.
Sherry FitzGerald also expressed concern, believing the move threatened to place further strain on a market struggling from a shortage of supply and contracting sales volumes.
Hours after the announcement, director Simon Ensor said there was no immediate indication that current transactions were in jeopardy as a result of the hike.
For people in that price bracket, an extra €50,000 normally isn’t a deal breaker
— Sherry FitzGerald director Simon Ensor
“I really really don’t think [it likely]. The only time I can see it happening is if somebody was having second thoughts anyway,” he said. “If it’s €1.85 million or €2 million I don’t see it having an effect anyway because the differential isn’t that great ...[for] people in that price bracket, an extra €50,000 normally isn’t a deal breaker.”
Mr Ensor said he was surprised by the move given the lack of mobility in the market generally, and particularly at the upper end due to a shortage of bridging finance.
Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers (Ipav), said it was difficult to see the rationale of the measure because if it discourages would-be buyers from trading up past the €1.5 million mark, that could have knock-on consequences further down the supply chain.
“Stamp duty is a considerable thing when it rises [by] that amount; 5 per cent is a hell of an increase,” he said. “We didn’t have any thought that it was going to happen.”
Savills pointed out that only about 3.5 per cent of all listings on MyHome.ie are valued at €1.5 million or higher, making it a niche market segment with limited options.
“While this new measure could impact some sales, it’s important to note that buyers in this price range tend to be highly selective and may not be significantly deterred, especially if they’ve secured the property after a competitive bidding process,” said director Andrew Smyth.
While the change could cause some buyers to reduce their bid price, Savills added, it would ultimately depend the level of competition that existed for the property.
Rowena Quinn, managing partner of Hunters Estate Agents, believes the unexpected change would disproportionately affect sales in Dublin. Whatever revenue it may raise, she said, it also stood to dampen growth in the market, counteracting any economic benefit.
