THE Government has made minor concessions to house buyers planning to spend more than £150,000 on second hand homes. A new rate of 9 per cent announced before Christmas will now apply only to houses costing over £170,000. There will a staggered rate of duty on houses between £150,000 and £170,000.
Homes selling for £150,001 to £160,000 will be liable for duties of 7 per cent while houses between £160,001 and £170,000 will incur a rate of 8 per cent.
The new duties will yield £13.5 million in a full year - £500,000 less than the blanket 9 per cent rate was due to raise for the Exchequer. The higher stamp duty will compensate for the abolition of the Residential Property Tax which brought in virtually the same amount last year. It is estimated that the £13.5 million will come from about 1,400 buyers, of which over 80 per cent are in the Dublin area. The same level of revenue was paid by about 14,000 house owners under the RPT.
The Minister's decision to stagger the rate of stamp duty is being viewed in the property market as no more than a token gesture. Estate agents say that far from stabilising house values, the new stamp duty will lead to higher prices because of the reluctance of couples to trade up to the middle price range and the increased competition for houses below £170,000.
Mr Mark FitzGerald, managing director of Sherry FitzGerald, warned last night that the higher stamp duties would inevitably lead to further increases in house prices.
"Fundamentally, it still has the effect of encouraging house price inflation in the £120,000 to £170,000 bracket in that people in that bracket won't be encouraged to move and those trying to trade up into that bracket will have a limited opportunity to do so, because the supply will not be there. This will push up prices.
Mr Tom Day, a director of Lisney, described the 9 per cent rate as "extremely harsh" and said it would greatly reduce mobility in the Dublin housing market.
According to Mr FitzGerald, about 1,400 house buyers will be "paying the new rate of stamp duty annually. "By and large these are people in the 35-40 age group, couples who are already paying substantial amounts of tax.
The Irish Home Builders Association said the absence of adequate funds for new roads, water and sewerage services was holding up many large housing developments. The absence of properly serviced land was putting upward pressures on the price of sites which could not be sustained.
The Irish Auctioneers and Valuers Institute said the stamp duty changes would find little sympathy in the property sector. The changes would be at least as biased as the RPT was against urban home owners. They would fuel price increases within all sectors of the second hand market, particularly below £150,000. The impact would also find its way into the new homes market as buyers faced with 9 per cent, stamp duty would switch to new homes in greater numbers.