Following Budget 2018, Dr John McCartney, Director of Research at Savills Ireland commented;

Commercial Stamp Duty to Hit 550,000 Private Sector Pensions

• Standard practice is to value commercial property net of purchase costs - which include stamp duty
• Therefore stamp duty increases feed through to an immediate and commensurate reduction in property values
• 550,000 private sector workers currently have money in pensions – most of which incorporate property funds
• Today’s measures will directly subtract from the value of these pensions

Unlikely to Raise As Much Revenue As Expected

• Revenue generating estimates for today’s commercial stamp duty increase originate from Tax Strategy Group calculations
• The TSG assumed an additional €100m for each percentage point increase in non-residential stamp duty
• However this estimate is based on evidence from an atypical period of intense commercial property trading during which distressed assets changed hands prolifically.
• We have already moved into a more normalised environment of lower trading activity. To illustrate this, last year €4.5bn of commercial property assets were traded. The likely turnover for 2017 will be €2.25bn.
• On this basis we believe the Government has overestimated the potential tax take from today’s commercial stamp duty increase

Resi Land – Excluded From Commercial Stamp Duty Hike

• Residential development sites are considered non-residential for stamp duty purposes
• Government heeded Savills’ warning that higher stamp duty on residential sites would increase the costs of housing development and hinder new supply
• Savills therefore welcomes the introduction of a Stamp Duty Refund Scheme for purchasers of land who develop within 30 months.

Vacant Site Levy Increased to 7% - Could Amplify Boom-And-Bust Cycles

• Land is a raw material for developers. It is natural for them to carry a stock of development land.
• No developer will now carry a land-bank in a slow market. 
• This means when a recovery follows developers will spend the early years on site assembly rather than the house building the could and should be doing.
• This could amplify boom and bust cycles.
• Implementation Is Key – many vacant sites are encumbered by issues such available services, roads, and legal title. So scheme should be implemented in a way that does not punish owners of sites that are not capable of development.

Reduction of Holding Period for Capital Gains Tax Exemption

• Requirement for people who bought development sites between 2012-2014 to hold them for seven years before selling without a capital gains tax bill has now been reduced to four. 
• Buyers who purchased in 2012 and 2013 should be able to exit immediately with a profit if they do not want to, or are unable to, develop. This will make room for others to come in and put the land to productive use.]

Reduction in Mortgage Interest Relief – Changes Are Fundamentally Fair

• Mortgage interest relief was initially scheduled to expire at the end of this year
• Today’s budget confirms Programme for Government promise that it will be now be extended albeit on a sliding scale
• People who bought homes between 1st Jan 2004 and 31st Dec 2012 are eligible on the basis that they bought at high prices and therefore face high repayments.
• But it is important to note that average house prices are now 2.1% higher than they were in early 2004 (3.2% higher in Dublin).
• It would be unfair to exclude people buying today at higher prices than 2004 from mortgage interest relief while continuing to extend this benefit to boom time buyers in perpetuity.