West Cork Property and the New Stamp Duty Regime

Cowen & Arafat laughing

Tickle! tickle! Cowen and Arafat share a laugh about revolutionary politics.

What will happen to West Cork property in 2008 is the question on everybody’s lips (or at least on mine, anyway). It all looked very gloomy and doomy for most of the year, until, right at the end, the Minister for Finance Brian (“Biffo”) Cowen made a subtle but fairly revolutionary change in the stamp duty regime for houses in Ireland.

The changes are subtle enough in that there isn’t any huge change in the amount of money that will be “saved” following the new changes, which came into immediate effect.

But the revolutionary thing about these changes is that the basis for assessment has changed fundamentally from being a bit mad to being calm and logical. Let me expand further:

Under the old set-up, every time you entered a new band, the higher rate applied to the entire amount. This meant that it often became a crucial issue when the price being negotiated approached such a point and it often resulted in an aberration of pricing whereby the seller would fix the asking price a comfortable distance away from the cut-off point. For example, someone who might reasonably have asked 260,000€ for their property might have targeted €255,000 as their lowest acceptable figure. But this figure is just €500 above the cut-off point for the change in stamp duty (under the old system, that is). So, the buyer, would be angling towards an offer of 250,000, as there was quite a difference between paying 4% on 255,000 as opposed to paying just 3% on 250,000.

Now, however, all that has changed. The first 125,000 is not considered, and a flat rate of 7% applies thereafter. It sounds like it could mean an increase in some cases, but there is a saving in all cases. The only other band applies when the property goes over a million, but even then, the higher rate will only apply to the amount above the million and not to the entire consideration (as was the old way).

So, all in all, it is a great new departure. Simplifying the system makes it easier for all concerned. There’s also less tax for buyers to pay, which may free up the movement of property (people trading up, people trading down) in the market place. Time will tell what effect it will have on the national and the West Cork property market.

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