Property market in limbo until Budget
With uncertainty over stamp duty and property tax, buyers are adopting a wait-and-see approach, writes Jerome Reilly
Pre-budget jitters and intense speculation that Finance Minister Brian Lenihan will abolish or cut stamp duty to 1 per cent is holding up hundreds of house sales as buyers refuse to close deals until after December 7.
Auctioneers around the country say the lack of clarity and fears of a wide-ranging property tax is making a desolate property market even worse.
In the Dublin area, property prices have now plunged 52 per cent from their height in 2007, according to residential property specialist Douglas Newman Good (DNG).
There were some encouraging signs of activity in the first six months of this year but since June the market has slumped again.
Brian Dempsey of DNG told the Sunday Independent: "There is a lot of talk about stamp duty versus property tax and about what direction Brian Lenihan will take. I think it is very safe to say that numerous people will wait to sign the contract or to close the sale until after the Budget. We already know of a lot of sales which will close the day after the Budget.
"Most people are setting the date that they hand over the rest of the money at December 8, the day after the Budget," he added.
But he said that waiting could be a double-edged sword.
"Imagine if the minister decided that any transaction that went through before the Budget would not have to pay property tax next year, but any transaction that went through after the Budget would?"
Mr Dempsey dismissed suggestions that the gloomy prediction made last week by economist Morgan Kelly of a mortgages time bomb had made an impact.
"We have not seen anything. Waiting until after the Budget is the main thing. People now more than ever want clarity," Mr Dempsey said.
David Bewley, Director of Residential Sales with Lisney, said that Michael McDowell was to blame for the phenomenon of recent years, which meant property sales slump immediately before the Budget. He suggested that in the current climate, stamp duty should not be a major issue.
"There are not many houses making over €1m these days," he said.
Mr Bewley said he was sceptical that stamp duty would be abolished at this time, but added there was so much rumour that Mr Lenihan would cut or abolish the rate it was not surprising people were adopting a wait-and-see attitude.
Mr Bewley said it was wrong to be too pessimistic.
"We are selling houses. You would have to ask a lawyer when stamp duty changes would kick in if Mr Lenihan took that course. Is it when the deposit was paid? When sale was agreed? Or when the keys were handed over? You never seem to get a straight answer from the legal experts," he said.
Mr Bewley said he accepted that generally the property market was "thin enough".
"People have got used to doom-laden prophecies, like Morgan Kelly made in the Irish Times. In that article he suggested that we would find ourselves in the future dealing only with cash customers. What he doesn't appear to know is that effectively we are in that situation already.
"There is no liquidity in the market. No one is buying a house unless they are without a house.
"There are no investors in the market and so we are largely dealing with cash buyers. The first half of the year was busier than the second half, particularly after September 1," he said.
Ronan O'Driscoll, Head of Residential Property with Savills is convinced that nervousness surrounding the Budget is hitting the property market hard.
"It's stagnating the market, not that there was a whole lot of activity anyway. People need to know what is happening. People need certainty," he said.
"People are being quite upfront about it. They are thinking about making a large transaction and they are saying, 'Look I want to buy the house but I want to see what's in the Budget for me'."