Real Estate has been saved
Against the backdrop of an unprecedented economic environment and with the main focus being on supports for business and employment, the changes announced in terms of real estate supports are broadly extensions of existing measures with a commitment to deliver a significant number of social & affordable homes in 2021 and subsequent years.
- Help-to-Buy scheme
The current expiry date on the availability of the enhanced relief of 5% of purchase price or €20,000 to 10% of purchase price or €30,000 has been extended from 31 December 2020 to 31 December 2021.
- Stamp duty
The stamp duty refund scheme on land which is used for residential property development was extended to include developments commencing before 31 December 2022. The Minister further announced the increase in the time allowed from commencement to completion to qualify for the scheme by 6 months to 2.5 years.
- VAT on hospitality and tourism
The Minister recognised the specific difficulties currently faced in this sector via an announcement of a VAT reduction from 13.5% to 9%.
- Accelerated capital allowances (ACA)
The ACA scheme has been extended by a further 3 years. The Minister noted in his comments in extending same that the qualifying criteria would be reviewed to ensure the scheme remained appropriate. This measure allows businesses an upfront write off on capital spend on energy efficient equipment.
- Interest limitation rules
The Minister announced that interest limitation rules would be introduced. These rules are expected to take effect from 1 January 2022.
- Social and affordable housing
A sustained multi annual building programme with the aim of adding to the annual stock of housing was announced. €5.2B has been allocated to the Department of Housing to achieve this goal.
First time buyers will have noted with interest the extension of the Help-to-Buy scheme. This is a further welcome development to the measures announced previously in the July stimulus package.
The move to address operational anomalies in the stamp duty refund scheme will be widely welcomed particularly in the context of multi phase developments. A report recently released on the Irish housing market noted house prices rose in Q3 2020 by 5%. This a timely reminder that demand for housing has not gone away as a result of COVID-19. The refund scheme ensures that the additional stamp duty on land acquisition is not added to the cost base where housing is delivered within the timeframes set out.
The reduction in the rate of Vat to 9% for the hospitality sector is needed and welcome.
Postponing the interest limitation rules to the expected introduction date of 1 January 2022 is a helpful development in that it allows for additional time to further consider the associated significant risks of unintended consequences. When the time comes for Ireland to introduce such rules, caution is needed to ensure no disproportionate impact on real estate participants who by their nature are highly leveraged.
On the housing development front, it is key that the focus now moves to delivering the targeted number of units these funds are intended to achieve. The challenge will be in the delivery given the private sector who are at full speed are struggling to deliver this level of product. On a positive note, the funds have been allocated but delivering is the challenge, even without Covid.
We await the Finance Bill for more detail on the key measures mentioned above.