Property: Stamp duty falls but first-time buyers hit
STAMP duty charges on house sales have been cut in the Budget, ahead of the introduction of a full-blown property tax in 2012.
But first-time buyers who had been exempt from the charges will be pulled back into the tax net as a result of the move.
A rate of 1pc will apply to all house purchases up to €1m from today, while those purchasing homes valued at over €1m will pay 2pc.
Currently, stamp duty rates of up to 9pc apply to transactions on property.
Stamp duty on residential property has raised around €80m so far this year, compared with a peak of €1.3bn in 2006 at the height of the boom.
The Government will introduce a flat-rate property tax from 2012 of around €100, rising to €200 the following year.
The 2012 tax will be paid to cash-strapped local authorities and county councils, as is the case with the existing €200 on second-hand homes.
Finance Minister Brian Lenihan yesterday claimed the move will not only boost the property sector but will also provide useful valuations for the market.
"If this system had been in place instead of the previous volatile one, it would have lessened the effect on tax revenue of the booms and busts in the market," he told the Dail.
"The information gathered from this new regime can be used to compile data on house valuations to inform a valuations database."
The Government is gearing up to use the State Valuation Office to assess what tax should be applied on the 1.8 million homes around the country after 2010.
This would mean a phasing out of the flat-rate system which many believe is unfair because the same tax is paid on a small home and a mansion.
The Government is also abolishing other existing reliefs and exemptions for stamp duty on residential property as part of its review of the sector.
There will be further incentives for local authority tenants to purchase their homes through an increase in existing discounts.
The review was welcomed by industry experts last night.
"The reduction in stamp duty will afford people greater opportunities to trade up and down and improve efficiency in the use of the national housing stock," Simon Ensor of the Irish Auctioneers & Valuers Institute said. "Stamp duty reform is long overdue."
However, he added the inclusion of first-time buyers into the tax net could be a disincentive for younger purchasers.