Budget 2013 could have implications for the Irish property market
Yesterday’s Budget 2013 has delivered mostly bad news for Irish consumers. The introduction of a property tax, which has been a big talking point of this year’s Budget, will become reality for homeowners the length and breadth of Ireland. But, there have been other measures announced by Minister of Finance Michael Noonan to incentivise first time buyers to enter the property market.
The most anticipated change of all relates to bringing in a full-fledged tax on property to replace the Household Charge. Labelled the Local Property Tax (LPT), it is going to cost mortgage holders between €300 and €500 annually. Most interesting is that determining the market value of a property will be the sole responsibility of its owner who can use guidelines provided by the Revenue to help calculate an accurate market value of their home.
The LPT will be charged at a rate of 0.18% on the market value of a properties worth up to €1 million and 0.25% on any balance exceeding the million Euro mark. Payment can be arranged by a range of methods such as direct debit, credit card, in cash, or added as a deduction on a pay slip or taken from other income sources like Social Welfare or pension payments.
Responsibility to collect LPT payments will fall upon the Revenue Commissioners who will start their work on the 1st July 2013. The potential extension of the mortgage tax relief scheme currently available until the end of 2012 was another popular pre-Budget topic. Many wondered whether Mr. Noonan would renege in on his commitment to not extend the scheme beyond the 31st December deadline.
Honouring his word by not announcing an extension to the first time buyer incentive during his Budget speech, he has granted a 3 year exemption to any first time buyer who buys a home in 2013 with similar exemptions being offered to those who purchase new builds or previously unoccupied homes before 2016. However, those with second properties will not have to pay property tax until 2014.
With 2013 around the corner, only the passage of time will reveal whether the announced property tax exemptions will build on the pick up in mortgage applications made by first time buyers looking to take advantage of Mortgage Interest Relief.