Com­mer­cial prop­erty and the in­crease in stamp duty

The Irish Times - Thursday - Property - - Front Page -

In Oc­to­ber, the Govern­ment raised the rate of stamp duty levied on com­mer­cial prop­erty trans­ac­tions from 2 to 6 per cent. For the in­dus­try, the sur­prise was not nec­es­sar­ily the in­crease in duty im­posed, but the scale of it.

“It was a real shock. We thought it might dou­ble from 2 to 4 per cent but we were re­ally quite shocked that it tripled. It’s sel­dom that any tax triples overnight,” says Roland O’Con­nell.

He now ex­pects trans­ac­tions to dip on the back of the move.

“When trans­ac­tion fees are low, it’s much eas­ier to buy and sell prop­erty. As they start to rise, it be­comes more dif­fi­cult to buy and sell prop­erty”.

Af­ter all, the greater the costs, the longer in­vestors may have to hold prop­erty in or­der to get a re­turn on their money. As O’Con­nell notes, an in­vestor will typ­i­cally need a 10 per cent uptick in the prop­erty price just to break even – and a 20 per cent in­crease in prices to make a cap­i­tal gain of about 10 per cent.

“This can take a long time,” he says.

But while the move may have shocked, it does put Ire­land on a par with many other coun­tries. Ac­cord­ing to data compiled by Sav­ills, in Brussels the stamp duty rate touches al­most 12 per cent, while Hong Kong, Paris, Cologne and Dus­sel­dorf all have rates of more than 6 per cent, with Ire­land now join­ing Ber­lin, Frank­furt and Aus­tralian cities like Syd­ney and Perth on 6 per cent. How­ever, it is now un­com­pet­i­tive vis-a-vis other Euro­pean cen­tres such as Lon­don (4 per cent), Mi­lan (4 per cent) and Copen­hagen (1 per cent).

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