Stamp duty changes in Budget 2007

Rooy

Anyone got thoughts on what are the sort of changes that will be introduced ? - rate reductions , band changes ?

Idleater

Rooy wrote:

Anyone got thoughts on what are the sort of changes that will be introduced ? - rate reductions , band changes ?

I'm no politician, but there is an election next May, so I would doubt it very much if they would do much to annoy the plebicites...

L.

Victor

Stamp duty changes in budget 2006

Budget 2006 was in December 2005.

Lex Luthor

I will guess that they will raise the threshold for owner occupiers and possibly change the %'s a bit to make it easier on them. I think the investor rates won't change

seamus

I'd say they'll want to continue encouraging the building of new homes (and apartments in particular), and may increase the stamp duty bands for investors buying places < 125 Sq.m., and increase all the bands for owner occupiers buying new homes > 125 Sq.m.

They may also normalise the stamp duty bands - the current ones have been in place since at least before the euro came in - bringing the exemption band up to 350k or even 400k could encourage growth.

Essentially, nobody wants to be in Government if/when the market crashes, and they will consult everyone they can to try and eek out at least another four years' growth.

A much more measured change would be layered stamp duty, like income tax. That is, FTBs pay no stamp duty on the first 317,500, pay 3% on the next 70k, 6% on the next 250k and 9% on the balance, etc.

Lex Luthor

seamus wrote:

A much more measured change would be layered stamp duty, like income tax. That is, FTBs pay no stamp duty on the first 317,500, pay 3% on the next 70k, 6% on the next 250k and 9% on the balance, etc.

I can see something like this alright, but FTB's should be exempt for SD, regardless of new build or not

ionapaul

They don't need to get another 4 years property market growth, remember (I would feel it absolutely impossible to avoid the crash for another 4 years, unless they start giving money away to FTBs!), they just need to the general election without the effects of the crash becoming noticeable, get re-elected and worry about the damage done to the country further down the line! This will probably be a give-away budget in any case, despite the warnings of the economists.

The_Conductor

Lex Luthor wrote:

I can see something like this alright, but FTB's should be exempt for SD, regardless of new build or not

Why?
A first time buyer might be in a far better position than someone who bought 6 months ago and has over 100% debt.
Surely its fair to encourage people to get a foot on the ladder.
Abolishing SD altogether for FTB would only encourage people to attempt to take on more debt initially and buy as much as possible, in the knowledge they wouldn't be able to afford it later......

Personally I hope that owner occuppiers will be more favourably treated in the budget- a particular bugbear of mine is the manner that investors are able to write off Management Charges against taxable income, while owner occuppiers are not. Hell if you were renting you'd even get a tax credit (admittedly a pittance, but better than nothing).

The government seriously has to do something to make sure that the developing collapse in the US and continental Europe markets does not make a volatile situation here unbearable. At least estate agents are becoming more realistic here......

The_Conductor

Ps- I find all the news reports about the Minister for Finance has a war chest of 9-12 billion to dispense in the budget very amusing. First of all- the public finances are *not* in surplus- we predict we will have to borrow around 1.2 billion this year (taking our national debt up to about 32 billion). While this is lower than anticipated, the fact that we had to borrow less money that we thought we would have to does not mean we have money in the bank to spend.....

We are storing up a hell of a lot of trouble and heartache for ourselves, in the very near future.......

Victor

smccarrick wrote:

Personally I hope that owner occuppiers will be more favourably treated in the budget- a particular bugbear of mine is the manner that investors are able to write off Management Charges against taxable income, while owner occuppiers are not. Hell if you were renting you'd even get a tax credit (admittedly a pittance, but better than nothing).

Should bungalow owners get a tax credit on their grass cutting, house insurance and ESB bill?

One is a business expense the other a domestic expense.

The_Conductor

Victor wrote:

Should bungalow owners get a tax credit on their grass cutting, house insurance and ESB bill?

One is a business expense the other a domestic expense.

While it may be a domestic expense- it is a non-optional domestic expense, imposed on owners largely as a result of government policy which encourages the building of apartment complexes and most often insists on the inclusion of a Management Company as part of the planning conditions.

While it may be a "domestic expense"- it could very well be argued, that a sizeable lump of the Management Charges are a form of double taxation- if you were living in a housing estate your taxes pay towards the council cutting grass, water and sewage etc. while as an apartment dweller the Management Company often has to deal with all of these independently.

I am in negotiation with South Dublin County Council regarding taking in charge of a complex where the Management Company decided unilaterly to dissolve itself. All the council are willing to guarantee is a water supply......

There are a lot of people who do not know what they are letting themselves in for when they purchase leases on property in complexes. Perhaps there is a more fundamental need for regulation of Management Companies than a reform of the tax regime?

My argument was that there is a perception that Management Charges are applied inequitably among the different classes of property owner- and a suggestion that this perception be levelled.

There are a whole load of tax credits that do not make sense- mortgage interest relief/cosmetic dental relief etc.... This suggestion in my eyes has more merit than a lot of the other ones.

misty floyd

What are peoples thoughts on the FTB allowance? Is it a possibility that it could be re-introduced?
With so much revenue from SD I can't see cowan tampering too much with it(IMO for what its worth). In terms of winning votes and doing something for FTB's, would the allowance be a good option for the government?

Victor

misty floyd wrote:

What are peoples thoughts on the FTB allowance?

If you mean the grant, no it won't happen.

seamus

misty floyd wrote:

What are peoples thoughts on the FTB allowance? Is it a possibility that it could be re-introduced?

I'm not sure. That may be a trump card for maintaining growth that they'll hold until they need it.

With so much revenue from SD I can't see cowan tampering too much with it(IMO for what its worth).

They tend not to mess with it too much, but minor adjustments aren't rare. Like VRT, SD is one of those taxes that makes a shedload of money, doesn't serve any purpose other than revenue generation (so no-one has particular expectations on where it should be spent) and is next to impossible to avoid, unlike PAYE, VAT, etc.

In terms of winning votes and doing something for FTB's, would the allowance be a good option for the government?

No. FTB's would still be made up mostly of those age groups with the lowest voter turnout, so they're more likely to do more for those people who currently own property and investors, as they are the people more likely to vote. An FTB's grant may sway the builders (as they can inflate prices to swallow the grant), but it doesn't have massive benefit for anyone else.

The_Conductor

misty floyd wrote:

What are peoples thoughts on the FTB allowance? Is it a possibility that it could be re-introduced?
With so much revenue from SD I can't see cowan tampering too much with it(IMO for what its worth). In terms of winning votes and doing something for FTB's, would the allowance be a good option for the government?

Thoughts? The first-time buyers grant is dead and is not coming back. The government is tired of tinkering in the housing market and getting its fingers and its reputation tarnished. Their last attempt where they rejigged SD on second hand houses for FTBs blew up in their faces overnight- they are unlikely to be interested in tampering too much again.

To be quite honest- there are going to be quite a lot of people hurting come election time, and thats if projected interest rate increases are at the lower end of forecasts. At current levels- FTBs mortgage approvals are averaging 78k lower than they were exactly one year ago- and those FTBs who bought a year ago are now paying 40-42% of their disposable income in mortgage payments (this is considered a position of high stress) (Note these are figures released by Irish Life and Permanent and based on the Dublin Housing market). The Department of Finance have more or less accepted that stamp duty is going to fall- this is taken into account with the estimate inflators which have been circulated to all government departments.

The big aim now is to keep the economy growing at an even keel (3.5-4.0%) while accepting that the housing market has at very least plateau'ed- and at worst is facing significant downside factors with tightening monetary supply.

Economic growth in this country in the past few years has seen massive hikes in VAT, Stamp Duty and corporation tax- but not a comensurate increase in income tax. This is because the vast bulk of all the new jobs that were created are low paid service sector jobs. What the budget is far more likely to attempt to do is somehow translate a significant portion of these, and of new job growth into higher income generating sectors- and away from the low paid (relatively) service sector.

Economic commentators have focused on Cowan having 2 billion (or whatever sum) to "give away" on budget day. This is manure. We expect to borrow 2 billion less than originally anticipated in November of last year. We are still going to be borrowing over a billion- and this at a time when our economy is in peak condition. It would be a foolhardy Finance Minister who borrowed money to buy an election- particularly a foolhardy FF minister when memories of 2002 are still fresh in people's minds.

podgeandrodge

so...one month later

what do people think the budget will do for stamp duty on houses...

will they make an effort to stop the property slump?

will they allow people with contracts signed now to avail of new rates if the deeds execution is after the budget?

chump

I hope and half-believe they'll do nothing.

I would not be too surprised, however, if they decide to tinker with it. And if they do, any iota of respect I have remaining towards their leadership will be out the window. It'd be a disaster.

Victor

I did some fiddling around with numbers last week.

If I have it right (based on this), there are essentially 3 stamp duty regimes for property (and one further for shares).
* First time buyers of residential property - more benign that the other regimes, but with inequities at certain points
* Other buyers of residential property - steeper than first time buyers, but not as steep as land without residential buildings
* Land without residential buildings - essentially 9% across the board, with silly reductions under €150,000

The biggest objections people seem to have are:
* The jumps involved at certain points, e.g. for first time buyers €317,499 - no duty; €317,501 - €9,525 duty. In effect, the minister sets house prices within certain bands
* Its a transaction tax. Every time a property is sold, the full tax is charged, as opposed to taxing only the increase.
* Splitting transactions (strictly illegal) reduces the tax.

One possibility to remove the steps (they just aren't needed with land without residential buildings, the saving is slight) is to set the rate at 0% up to a certain figure, e.g. the current €317,500, then charge double (yes, double!) up to another certain figure, e.g. the current €635,000 and then revert to the standard 9% rate (or some other rate as needs decide). Slightly counter-intuitive, but it seems to work nicely.

Legend for graph
1 First Time Buyer (Rates of stamp duty for new houses and apartments with a floor area greater than 125 sq. metres and a Floor Area Compliance Certificate)
2 Owner Occupier (Rates of stamp duty for new houses and apartments with a floor area greater than 125 sq. metres and a Floor Area Compliance Certificate)
3 Rates of stamp duty for second-hand houses and apartments for first-time buyers
4 Rates of stamp duty for second-hand houses and apartments for other owner-occupiers (and investors)
5 Rates of stamp duty on land/housing sites without residential buildings

Heard a rumour that some exemption may be brought in for people of a certain age who downsize in property - to free up larger, older houses and estates.

gurramok

Deleted User wrote:

Heard a rumour that some exemption may be brought in for people of a certain age who downsize in property - to free up larger, older houses and estates.

If so, its about time...obviously on a scaled basis so houses in wealthy areas do not make the elderly person extremely wealthy by moving, maybe a rolling tax depending on valuation and not stumped up front?

My mam is one of those who lives in a 3bed and cannot downsize not even move to a smaller place because she is a pensioner hence cannot afford stamp duty.
She would not move to a new build apt as management fees scare the living dalylights out of her so a 2nd hand place is preferable.
There must be about 14 other 3bed houses on the road(outta 90) where the occupants are in similar position and cannot downsize because of stamp duty which means there could be thousands of these properties under-utilised across the country.

The_Conductor

The other side of this coin is the capital gain that would not be re-invested in new property. Alongside the reformed stamp duty they would have to exempt that portion of the capital gain that was not being re-invested from the sale of the principle residence- in the smaller new property.

To be quite honest at this stage its almost an academic point. I had a very interesting chat with a staff member of DNG at lunchtime. The second hand market eeeesss in trouble. The new market is not though..... Surprise, surprise....

podgeandrodge

sunday business post re-iterating that changes to stamp duty are unlikely unless possibly for 1st time buyers of second hand homes...