The stamp duty changes in the 2011 Budget don’t seem to have caused much reaction – or maybe some people just believe all the hype?
The stamp duty changes are supposed to help the property market – according to Brian Lenihan – but it is hard to see how it will not do the opposite.
There will now be just 2 rates on residential property – a lower rate of 1% on sales upto €1 Million and a rate of 2% on amounts over €1 million.
Current rates of stamp duty are 7% on properties upto €1 million and 9% on amounts over that.
BUT – the Budget abolished all the current exemptions .
That means First Time Buyers will no longer be exempt, properties under 125 sq metres will now be liable and the first €127k will no longer be exempt.
A first time buyer buying a house worth €200,000 will now have to pay €2000 stamp duty -it was previously zero.
Someone buying an apartment under 125 mt sq – priced at €175,000 would have paid no stamp duty. From Dec 8th 2010 – stamp duty of €1750 will be payable.
Press reports include quotes like this one from Keith Lowe, director of the Douglas Newman Good chain : “the new rates will allow people to trade up and down at far less cost. “It is also likely to encourage people in rental accommodation to purchase a home in the coming months,”
With many people in negative equity – it will probably be first time buyers that will get the housing market going again.
In 2010 First Time Buyers made up 58% of all new mortages in Ireland . With the average FTB mortgage at €189,000 – that probably equates to an average FTB purchase price of about €250,000.
So the change to the stamp duty rules will add approximately €2,500 to an average FTB buying with a mortgage. This on top of the deposit of about €25,000
How will this help the housing market?
One of the other reasons mentioned in the Budget for this blanket stamp duty – is because the government want to be able to track the purchase price of all houses. By charging stamp duty on every residential transaction – they want to use the stamp duty system to record purchase prices.
The UK have been recording house sale prices for years – via the Land Registry records . Why can’t we do this in Ireland instead of bringing in stamp duty for everyone.??