Implications for property from Budget 2013

Victor

Let's keep this thread about the direct implications on property from the budget.

Primarily:
* Changes to TRS/MIR
* Local Property Tax
* Capital Gains Tax
* Stamp Duty
* REITS

Idbatterim

Any first-time house buyers in 2013 will be exempt from Property Tax for four years.

14:47
Anyone who buys a previously unoccupied home will also be exempt from Property Tax up to the end of 2016.

TheDriver

as expected MIR is gone. At least it will stop the rat race that occured in last few months, shocked at amount of sales in Nov in Cork alone

tvc15

As a potential 2013 first time buyer that's a horrible budget, i was expecting the MIR to go but a small exemption in property tax is almost meaningless, basically getting half of the stamp duty back over a few years

I wonder what this will do to house prices?

Idbatterim

yeah this gesture is effectively worthless, which many people will greet, as it reduces government interference in the market... Its a positive for those who have not bought yet! The .18% that the tax will be charged at, will also be fixed for 3 years. anybody that buys to "save" 200-300 per year in most cases, needs their heads examined...

Zamboni

tvc15 wrote: »

I wonder what this will do to house prices?

It is immaterial.

tvc15

Zamboni wrote: »

It is immaterial.

Why?

Zamboni

tvc15 wrote: »

Why?

In my opinion, the chance of not paying €360 per year on a €200k property would be extremely low on the list of reasons on deciding a house purchase and timing of that purchase.

RATM

2016 is obviously the target date for the property tax to be up closer to €700-1000 per house so they're allowing a token exemption which doesn't mean much in real terms and then when the exemption is up people will really get hit.

murphym7

Do you think many people will fall for this one?

tvc15

Zamboni wrote: »

In my opinion, the chance of not paying €360 per year on a €200k property would be extremely low on the list of reasons on deciding a house purchase and timing of that purchase.

My assumption was that the prices will fall due to this, you would have saved multiples of this on a 200k house and for longer if MIR was retained now first time buyers have pretty much no incentives so will this pull the market down?

indiewindy

tvc15 wrote: »

My assumption was that the prices will fall due to this, you would have saved multiples of this on a 200k house and for longer if MIR was retained now first time buyers have pretty much no incentives so will this pull the market down?

It should help prices to continue falling

Theboinkmaster

Zamboni wrote: »

In my opinion, the chance of not paying €360 per year on a €200k property would be extremely low on the list of reasons on deciding a house purchase and timing of that purchase.

I agree. If I'm looking at a €400k house 1 January 2013 and decide to wait 2 years as i think it will go down, maybe to €350k.

I've saved €50k+ and the possible property tax saving of a few hundred euro is entirely immaterial to that.

murphym7

Can somone brighter than me work out a case study to help put this in perspective.

1) If MIR stayed what would have been my saving each year on a 200k house?
2) With 3 years, property tax free what is the saving?

Ritchi

murphym7 wrote: »

Can somone brighter than me work out a case study to help put this in perspective.

1) If MIR stayed what would have been my saving each year on a 200k house?
2) With 3 years, property tax free what is the saving?

About 1920 the first year for MIR, assuming a 92% mortgage(I think this amount reduces every year)
or 360 a year for the property tax.

Citizenpain

So MIR is based on Mortgage drawdown date-- Wonder what the Property tax exemption will be based on. Close date?

murphaph

Is this a joke or what? Why can't they do anything properly in Ireland.

They should apply a land value tax or something. In Germany I pay property tax, but I don't have to work out the market value of my property every 3 feckin years.

Is this just to provide work for valuers or what? How can I accurately value my property in a market where so few transactions are taking place? How will Revenue police those who will deliberately under value? My neighbour could be paying a couple of hundred quid a year less for the same type of house!! This is ridiculous.

I agree in principle with property taxation to establish a more stable and wider tax base. I disagree with the hair-brained way it's being implemented. The state should value areas and tax based on the land value.

Can I use the property price register as a valid means of estimating value? What happens if I sell up? Will I be liable to CGT based on my (possibly erroneous) lower valuation or will this valuation play any role in CGT liabilities?

markpb

What if you live in an unfinished estate or other area where your property is effectively unsaleable? Does that mean the value of your property is nill?

murphaph

markpb wrote: »

What if you live in an unfinished estate or other area where your property is effectively unsaleable? Does that mean the value of your property is nill?

Good question. What if I live next to this house? Can I point to this auction result and claim my property is worth 20k too?

seamusmacc

what if I or the valuer overvalued my property, would I get a refund of the property tax after I sold my property?

NIMAN

Did it not say houses in ghost/unfinished estates were exempt?

Of course everyone will undervalue their house. Then if Revenue try to argue that its worth more you only have to say "well you try to sell it for that" and they will have no comeback.

For example, a house similar to my own was up for sale a few months back for 40k less than what I paid, and it didn't get sold, so does that mean mine is worth that amount or less now? I say yes!!

Victor

http://budget.gov.ie/budgets/2013/FinancialStatement.aspx

FINANCIAL STATEMENT
OF THE
MINISTER FOR FINANCE
MR. MICHAEL NOONAN, T.D.
5th DECEMBER 2012

...

Property

In last year’s Budget, I introduced certain measures to help stabilise the property market, which was one of the major constraints on economic growth. This year has seen the first signs of stability in both the residential and commercial property markets in six years.

The residential market is showing increased activity due to the return of economic growth and the impact of the enhanced mortgage interest relief I introduced last year. This measure will end on the 31st of December this year as I have set out on numerous occasions. However, in order to maintain momentum in the domestic property market, I am providing an exemption from the new Local Property Tax up to the end of 2016 for any new or previously unoccupied homes bought in that period and, in addition, purchases of any homes in 2013 by first time buyers will also be exempt for the same period. This exemption for three years from the Local Property Tax will also apply to residences in unfinished estates.

In the commercial market, the Capital Gains Tax incentive that I announced in last year’s Budget means that any property bought between now and the end of 2013 will be relieved from Capital Gains Tax if held for at least seven years.

I am fully aware that regeneration is necessary in a number of our cities in order to ensure a balanced economic recovery. To date regeneration schemes have failed to encourage private sector investment in the areas most in need so I will examine proposals for a targeted incentive in already indentified regeneration areas.


Commercial Property and Real Estate Investment Trustes (REITS)

Initial indications are that the reduction last year of Stamp Duty from 6 per cent to 2 per cent for commercial property transactions has also helped bring stability to the commercial property sector. Demand for high-quality large office-spaces has strengthened in 2012. In order to attract new investment, I will provide for the establishment of Real Estate Investment Trusts, which allow for investors to finance property investment in a risk diversified manner.


NAMA

The introduction of REITs may also assist NAMA in deleveraging its portfolio and allow it to bring more sustainable activity to both the commercial and residential property markets. NAMA is already making €2 billion of funding available over the next four years to complete residential and commercial projects in Ireland. This investment, which is already underway with some €650 million of advances already approved, is expected to create significant employment in the region of 25,000 jobs in the construction sector and additional jobs in the wider economy.

NAMA is also making €2 billion of vendor finance available to prospective purchasers of commercial properties over the same period.

These property measures are also designed to create additional jobs in the property and construction sectors.

...

Local Property Tax

I will now turn to the Local Property Tax, which the Government is introducing as a better alternative to increased taxes on income. Property taxes are used across the world as they are better for the protection and creation of jobs than taxes that increase the cost of employment.

The Local Property Tax will commence with effect from the 1st of July 2013 for the second half of the year. In order to design a tax that is equitable, the Government has accepted most of the recommendations made in the Report of the Expert Group chaired by Dr. Don Thornhill. The Report is being published this week. The main features of the tax are as follows:

• It will be collected by the Revenue Commissioners
• Owners of residential properties, including rental properties, will be responsible for payment of the tax.
• The tax will be payable on the basis of the market value of the property as assessed by the owner. To aid owners, the Revenue Commissioners will provide valuation guidance to which owners can refer. Alternatively, owners will be free to use a competent valuer. The initial valuation will be valid up to and including 2016, which will provide three and a half years of certainty for property owners.
• The rate of the tax will be 0.18 per cent of market value up to €1 million and 0.25 per cent on values above that level. These central national rates will not be varied during the lifetime of this Government.
• Properties with a value of more than €100,000 and less than €1 million will be assessed at the mid-point of valuation band of €50,000 width - for example, properties valued between €150,001 and €200,000 will be assessed at 0.18 per cent of €175,000. Properties below €100,000 will be assessed at 0.18 per cent of €50,000.
• Properties valued over €1 million will be liable at 0.18 per cent on the first €1 million and at 0.25 per cent on the balance, with no banding applied.
• Property owners will be able to choose from a wide range of payment options including payment by direct debit; credit or debit cards, cash payments or “deduction at source” from salary/occupational pension or certain State payments.
• Certain properties will be exempt from assessment. These exemptions largely correspond to exemptions from the Household Charge.
• In order to assist those facing difficult circumstances, there will be a system of voluntary deferral arrangements that I will set out shortly.

This Government is committed to real local Government democracy and accountability. Therefore, from 2015, local authorities will have the power to vary the rates by 15 per cent above or below the central national rates to better match their funding needs. In this way the property tax will strongly reinforce local democratic decision-making and encourage greater efficiency by authorities on behalf of their electorates.

As I stated earlier, there will be a half year’s property tax charge in 2013. Using the example of properties in the €150,000 to €200,000 band, the charge in 2013 will be a half year charge of €157. It is important to note that this represents an increase for the year of no more than €57 on the household charge payable in 2012.

I have already set out certain exemptions from the Local Property Tax that will apply to first-time purchasers of homes in 2013 and to purchasers of new or previously unoccupied homes up to the end of 2016.

A voluntary deferral will be available to liable persons whose gross income limits do not exceed €15,000 for a single person and €25,000 for a couple. A deferral option will also be available up to the end of 2017 where gross income less 80 per cent of mortgage interest falls below €15,000 for single people and €25,000 for a couple. Marginal relief will apply where the income or adjusted income is €10,000 above the income limit, to permit deferrals of up to 50 per cent of liability. Interest will be charged on deferred amounts at 4 per cent simple interest per annum, which is half the rate charged in default cases. Deferred property taxes and interest will have to be discharged on the sale/transfer of the property.

The Household Charge will cease with effect from the 1st of January 2013 and the NPPR Charge or “second homes charge” will cease with effect from the 1st of January 2014.

Full details of the Local Property Tax will be set out in the Finance Local Property Tax Bill 2012 which will be published this week and commence second stage in the Dáíl next week. Extensive information is available on the Budget and Revenue Commissioners website and from the Revenue Commissioners helpline.

I view tax compliance as a core principle of our democracy. Public services can only be provided to citizens because people pay their taxes. I want to reassure the vast majority of tax compliant citizens that the Revenue Commissioners will strictly enforce the Local Property Tax and they will collect any unpaid Household Charge for 2012. Any arrears that are not discharged before the 1st of July 2013 will be increased to €200 and will be collected through the Local Property Tax system.

The Local Property Tax is fair and progressive as all property owners make a contribution but those who own the most valuable properties will pay the most.

http://budget.gov.ie/budgets/2013/LocalPropertyTax.aspx

Local Property Tax

The Local Property Tax (LPT) is payable at a rate of 0.18% of the market value of properties (by reference to bands of €50,000) up to €1m and 0.25% on any balance above €1m.

The Household charge will be abolished from the 1st of January 2013 and LPT will only be payable from the 1st of July 2013 for half year only.
Local Property Tax Publications

Local Property Tax Leaflet (PDF)
Local Property Tax Presentation (PDF)
Local Property Tax Frequently Asked Questions (PDF)

Local Property Tax Table
Enter the Estimated Property Value


Valuation Band Mid Point Rate Full Year Property Tax 2013 Property Tax
0 - 100,000 50,000 0.18% 90 45
100,001 - 150,000 125,000 0.18% 225 112
150,001 - 200,000 175,000 0.18% 315 157
200,001 - 250,000 225,000 0.18% 405 202
250,001 - 300,000 275,000 0.18% 495 247
300,001 - 350,000 325,000 0.18% 585 292
350,001 - 400,000 375,000 0.18% 675 337
400,001 - 450,000 425,000 0.18% 765 382
450,001 - 500,000 475,000 0.18% 855 427
500,001 - 550,000 525,000 0.18% 945 472
550,001 - 600,000 575,000 0.18% 1,035 517
600,001 - 650,000 625,000 0.18% 1,125 562
650,001 - 700,000 675,000 0.18% 1,215 607
700,001 - 750,000 725,000 0.18% 1,305 652
750,001 - 800,000 775,000 0.18% 1,395 697
800,001 - 850,000 825,000 0.18% 1,485 742
850,001 - 900,000 875,000 0.18% 1,575 787
900,001 - 950,000 925,000 0.18% 1,665 832
950,001 - 1,000,000 975,000 0.18% 1,755 877
Over 1,000,000 1,000,000 0.18% 1,800 900
Over 1,000,000 Balance 0.25%

Victor

tvc15 wrote: »

My assumption was that the prices will fall due to this, you would have saved multiples of this on a 200k house and for longer if MIR was retained now first time buyers have pretty much no incentives so will this pull the market down?

Prices will continue a downward trend in 2013 as expected.

murphym7 wrote: »

Can somone brighter than me work out a case study to help put this in perspective.

1) If MIR stayed what would have been my saving each year on a 200k house?
2) With 3 years, property tax free what is the saving?

It was never going to stay.

Citizenpain wrote: »

So MIR is based on Mortgage drawdown date-- Wonder what the Property tax exemption will be based on. Close date?

Likely. You either get the TRS or the LPT exemption, not both.

StillWaters

LLs now liable for PRSI on rental income. This could have a big effect on LLs who are are just about holding on.

I know some who are very worried about this.

Victor

StillWaters wrote: »

LLs now liable for PRSI on rental income. This could have a big effect on LLs who are are just about holding on.

I know some who are very worried about this.

It's only a 'problem' if they are making a profit.

StillWaters

Victor wrote: »

It's only a 'problem' if they are making a profit.

Not necessarily, it is not clear yet if it is on gross or nett, if nett, thats fine.

On the plus side, NPPR abolished from Jan 2014.

Senna

regarding the property tax, did he say that local authorities can set the property tax for their own area after 2015? +/-15%?

StillWaters

Senna wrote: »

regarding the property tax, did he say that local authorities can set the property tax for their own area after 2015? +/-15%?

Yes

Victor

StillWaters wrote: »

Not necessarily, it is not clear yet if it is on gross or nett, if nett, thats fine.

On the plus side, NPPR abolished from Jan 2014.

What other income type is subject to PRSI on a gross sales basis?

sam34

can I ask a stupid question- I bought a house last yr and am getting MIR- will I continue to get that as was the original plan? when they say it's been abolished is that for new purchases from 2013 on?

tvc15

sam34 wrote: »

can I ask a stupid question- I bought a house last yr and am getting MIR- will I continue to get that as was the original plan? when they say it's been abolished is that for new purchases from 2013 on?

You're safe, new buyers only