Struggling investors will opt out of market
HARD-pressed property investors and developers may be forced out of the market if some aspects of the taxation report are implemented.
Buy-to-let investors will be faced with the abolition of mortgage interest relief -- a painful move which will be compounded if, as expected, interest rates treble within the next three years.
That would come on top of the new property tax as well as a range of other tax increases.
Tax increases coming at a time when demand for rental accommodation and rents are falling may well force some investors to get out of the rental market and thus add further downward pressure on apartment prices, some of which have already fallen by 40pc to 50pc.
The commission insists that investors, unlike other house buyers, should continue to pay stamp duty on the price of both new and second-hand residential properties, although at a lower rate, in line with European transaction taxes.
Fintan McNamara, chief executive of the Institute of Professional Auctioneers and Valuers, said that the property tax proposal was unfair as investors would have to pay even if the accommodation was unoccupied.
He also called for a cap of the amounts being paid by landlords who provide accommodation to socially assisted tenants.
These impositions on investors would also make it more difficult for developers to sell new homes, especially apartments.
The commission's proposals would also add pressure on developers who are already unable to pay off their massive bank borrowings.
The commission also proposes windfall taxes on zoned land, when the landowner sells on land, the value of which has been boosted by a new rail or road link or by rezoning.
Windfall
It recommends that such windfall gains should be calculated as extra capital-gains tax -- which would be worked out on the difference between the price received for the land and the value it had before the changes to its potential use.
It also proposes an annual tax on all land zoned for development where the land is not being developed as it believes this would discourage land hoarding.
Developers would also suffer under the proposals to cut the commercial property rates relief that is allowed when they are unable to find a tenant or when they are refurbishing an existing property.
In addition, the commission expects that up to €40m could be generated from increases in planning fees. Currently developers benefit from caps on the amount they pay in planning fees but the commission recommends abolishing the cap.
- Donal Buckley
