Thursday 16 August 2018

AIB backs better tax deal for landlords in housing crisis plan

Lender also favours cutting Vat rate for property developers to 9pc

AIB has developed several new initiatives to help boost housing supply — including a review of its credit policies for the buy-to-let market. Stock image
AIB has developed several new initiatives to help boost housing supply — including a review of its credit policies for the buy-to-let market. Stock image
Samantha McCaughren

Samantha McCaughren

AIB, the country's largest bank, has developed several new initiatives to help boost housing supply - including a review of its credit policies for the buy-to-let market.

It has also recommended a reform of the tax code for private landlords to further support the buy-to-let sector.

"We believe individual private landlords should be encouraged back into the market and placed on a more equal footing with their institutional equivalents," states an AIB document, Housing Supply in Ireland, which highlighted issues and suggestions.

The report also shows that the bank is examining new equity-release products for the so-called 'empty nester' market to "help develop a senior housing market in Ireland in order to free up under-utilised family houses".

"AIB is examining various lending and equity release initiatives in order to facilitate home owners to downsize," says the report. "This may include bridging facilitates that will make the process more efficient."

It has also made a number recommendations to support developers and backs a reduction in Vat for a specific period of time. This measure was previously suggested by Fianna Fail but Finance Minister Paschal Donohoe ruled it out in the last Budget.

Report author Pat O'Sullivan, AIB's head of real estate research, admitted it "is not the most palatable of options but it is effective". He said that while there was a risk the cut would not be passed on, developers ultimately want to sell houses. "We've tried to identify blockages in the system," said O'Sullivan who believes that the cost of construction is a key issue.

A cut in the Vat rate to 9pc would cost the Exchequer around €240m.

AIB is also "actively exploring the lack of senior debt funding for zoned land without planning permissions", and may offer some solutions to this. Builders need a much bigger portion of equity for projects since the crash.

The bank revealed that demand for developer lending for housebuilding has increased significantly. It is funding around 3,000 units a year, which will increase to 4,500 units over the course of 2018.

AIB also proposed the introduction of Government-backed 'equity loans' which would allow people to borrow money for a large chunk of their deposits.

AIB's head of wholesale, institutional and corporate banking, Colin Hunt said: "We are bringing a holistic approach to how we look at the market rather than just being a responder."

Sunday Indo Business

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