Commercial property consultants, CBRE Ireland, today reacted negatively to the Government’s decision to increase the rate of stamp duty on commercial property transactions in this afternoons’ Budget, which they see as having a direct impact on pension funds and the many institutional buyers who they say have been key to the recovery of this sector over recent years.
According to the commercial property experts, the sheer scale of the increase from 2% to 6% from midnight tonight is unwelcome, particularly at this point in the property market cycle.
Data from CBRE shows the impact on transaction volumes when stamp duty was reduced from 6% to 2% in 2011 (the same Budget that introduced the Capital Gains Tax waiver for those holding assets for 7 years, which has today been reduced to 4 years).
When stamp duty was reduced in 2011, the volume of investment spend, development land spend and hotel spend increased significantly. With the rate now heading back towards 6%, CBRE claim the opposite effect is likely on the basis that any increase in purchasers’ costs will ultimately result in a decline in capital value.
Savills have also re-iterated this point claiming the 550,000 private sector workers currently have money in pensions – most of which incorporate property funds. The property consultants claim today’s measures will directly subtract from the value of these pensions.
Speaking today, Executive Director & Head of Research at CBRE Ireland, Marie Hunt said, "A large proportion of the institutional capital coming from Europe and indeed domestically is pension capital, so this is an indirect tax on the pension industry which makes Ireland less attractive internationally. It will certainly have a bearing on investors decision-making, not least the price they will bid and pay for real estate assets from this point forward."
She added, "The idea that increasing stamp duty on commercial property in this way will encourage developers to switch from developing commercial property to developing residential is simply incorrect and demonstrates the extent to which Government are out of touch with the commercial realities of development and viability."
Source: www.businessworld.ie
