It was arguably the most anticipated budget in years and its impact on the Irish construction industry will be a defining moment in the development of the industry going forwards. Irish
Construction Industry Magazine rolled up its sleeves and over the coming pages has looked at the key element of the budget that will shape not just our industry by the economy into the future.
We have spoken to a host of commentators, analysts, industry associations to get their assessment on the budget from the practical perspective of the Irish building sector. Put the kettle on as this review is as comprehensive as it is long!
Killian O’Higgins, Managing Director, WK Nowlan Real Estate Advisors says: “The increase in stamp duty on commercial property gave the Minister for Finance the fiscal space he needed to deliver on tax cuts and socially progressive spending commitments elsewhere, particularly in housing for those homeless or seeking social or affordable accommodation.
Valuations of commercial real estate assets will be hit by the stamp duty increase, and I anticipate some transactions may be delayed as buyers re-evaluate offers and look to renegotiate deals where contracts are unsigned. Commercial values are expected to fall by just under 4% and this will be a one-off hit. Given the strong gains that commercial property owners have enjoyed in recent years, it’s no surprise that commercial property transactions have been targeted in the budget. At 6%, the stamp duty rate is below its level in 2010 and returns to a 6% level that existed for many years before the Celtic Tiger and subsequent crash.
Although we will hear about the ‘negative impact’ on foreign investment in real estate, those prepared to see Ireland as a good place to invest will continue to invest – it is just the apportionment of expenditure of, say €100m (excluding fees), will now be €94m to the vendor and €6m to the government as opposed to a €98m/€2m split on Monday. The €100m will still be invested, it is just that the government takes a greater share and the vendor gets less. Those already invested will take a hit, but for many, it is covered a multiple of times by the growth in market values over their period of investment. The reduction in the hold period for land, from seven to four years, to benefit from a CGT exemption will offset negative stamp duty impacts for some market participants.
For a more extensive article see our November/December Issue of Irish Construction Industry Magazine available on subscription, contact Linda Doran firstname.lastname@example.org