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Budget 2023 – Property Related Response

27th September 2022

This afternoon, Lisney chartered surveyors made several observations on Budget 2023 in relation to the property market.  In particular, Lisney welcomed the fact that the help-to-buy scheme at its current level will be extended for a further two years to the end of 2024.  Lisney also welcomed the €500 tax credit for renters but believes keeping private landlords in the market is essential to halting rising rents.  Lisney is very much against unwarranted vacancy and property dereliction, and in principle welcomes a new vacant property tax.  Lisney also acknowledges the review of REITs and investment funds but restates the importance of such funds to the Irish property market.

Help-to-Buy Scheme

Lisney strongly supports the decision to keep the extended help-to-buy scheme for first-time buyers until the end of 2024 at a higher rate.

“The help-to-buy scheme has been very successful and since 2017 has assisted 35,000 households.  The Government’s commitment to keeping it in the extended format (i.e. 10% of the purchase price to a maximum rate of €30,000, whichever is lower) for a further two years until the end of 2024 is very positive for the market.  It will assist in providing certainty to developers in terms of purchaser demand and means that they will continue to build homes and address supply issues.  For first-time buyers, it will allow them to get on the property ladder sooner and take many of them out of the rental market quicker, hence assisting the supply pressures that are in that part of the market.”

Renter Tax Credit

Lisney supports any measures aimed at assisting renters, and the reintroduction of a renter tax credit is welcome.  This credit will amount to €500 a year, equivalent to €9.60 per week.

“We strongly support any measures that help renters and the €500 a year is welcome.  However, this needs to be put in context.  According to the RTB, the national standardised average rent in Ireland in new tenancies grew by €1,475 between the end of Q1 2021 and Q1 2022 – almost three times the amount of the credit, and by €1,970 in Dublin – almost four times the credit. 

Taking a broader view, increased rental supply is critical to addressing rising rents, be it through new builds or keeping/attracting private landlords in the market.  In the last year, we estimate that perhaps up to 6,000 properties were sold by existing private landlords in the market.  At the same time, fewer than 1,000 buy-to-let mortgages were drawn down for new landlord purchases.  An RTB report from July 2021 shows that 86% of private landlords have just one or two tenancies (fewer than 150,000 landlords).  Keeping these small-scale, ‘mom-and-pop’ landlords in the market is essential.  The majority are selling because it is no longer a viable investment, most of which are using the property for pension purposes.  There have been continual increases in costs and bureaucracy in the last decade.  Examples include an unfavourable tax regime (USC charged on rental income, no mortgage interest relief), rent caps (especially relevant for those whose properties are significantly lower than market rents), and additional costs associated with RTB registration.  Many good and fair landlords are demonised and run into severe difficulties when tenants.  Pre-letting expenses were increased in Budget 2023 to €10,000, however more needs to be done.  A more favourable taxation policy would be the first step towards keeping landlords in the market, and must be considered by the government more closely.”

Vacant Homes Tax

Dwellings that are occupied for fewer than 30 days within a 12-month period will be subjected to a self-assessed vacant homes tax at three times the local property tax (LPT) rate.

“Lisney is very much against unwarranted vacancy and property dereliction.  In principle, we welcome a new vacant property tax so long as the exemptions take into consideration genuine reasons why properties are unoccupied.  For example, currently, there can be long delays in closing the sale of a property and vendors shouldn’t be penalised for this if they have already moved out of their previous home.  Equally, owners of properties undergoing major refurbishment works should not be penalised.”

Other

  • It is positive that the Stamp Duty Refund Scheme on residential development land is extended to the end of 2025, reducing the stamp duty liability to 2% from the non-residential rate of 7.5%. This will assist in scheme viability and in offsetting some of the recent growth in construction costs.
  • Capital investment of over €930m for water services is welcome. Connecting to water services is a serious constraint in residential development, which can result in long delays in housing supply.  Improvements are welcome, albeit more needs to be done.
  • Many of the housing measures were announced pre-Budget. However, we do welcome the €4.5bn funding next year for social and affordable housing, including cost rental, and the recently launched First Home Shared Equity scheme.
  • We note the announcement to review REITs and investment funds. REITs (since introduced in Budget 2012) and investment funds have played a vital role in the property market in recent years, including adding to the housing supply.  It is critical that they continue to operate and invest in Ireland.  While build-to-rent is often viewed negatively, it has added to the stock of rental properties, particularly in Dublin.  Without such investment, the rental crisis would be even worse, and they have partly filled the gap left by exiting private investors.
By Kevin Kavanagh
27th September 2022
RS-WS2