The Irish government cut stamp duty on commercial property in its 2009 Budget unveiled yesterday as part of a whole range of measures aimed at rejuvenating its residential and commercial property markets.

It said it would cut commercial stamp duty from 9% to 6% to kick start the market which has ground to a halt. Ireland’s stamp duty, however, is still higher than the European average of 5% and the UK rate of 4%.

In an unpopular move the Irish Government also increased the rate of capital gains tax at a time when the country’s property market is experiencing extreme difficulties. It also introduced a €200 annual levy per property on non-principle private residences, yielding around €40m (£31m) annually, and reduced the rate of mortgage interest relief for non first-time buyers which could impact on the availability and cost of rental accommodation.

Other measures in the budget are:

  • Rate of capital gains tax (CGT) has been increased from 20% to 22%.
  • Corporation Tax rate remains unchanged at 12.5% .
  • Accelerated Capital Allowances for energy efficient equipment.
  • First time buyer’s mortgage interest relief increased from 20% to 25% for year 1 and 2. Increased from 20% to 22.5% for years 3, 4 and 5 and remaining at 20% for years 6 and 7. For non-first time buyers relief is reduced from 20% to 15%.
  • Increased local authority loans to assist first time buyers
  • a ‘Government Equity Initiative’ scheme to assist those wishing to purchase affordable homes.

CB Richard Ellis welcomed the budget, which has come a few weeks after the Irish government was forced to guarantee its six main banks which have been badly hit by the credit crunch with a €400bn (£312m) package.

CBRE said it was surprised by the government’s decision to introduce the €200m (£156m) levy but it said ‘a very tough but prudent budget that will help sustain and stabilise the economy in the medium term’.

Guy Hollis, managing director at CBRE, said: ‘The commercial property market in Ireland has effectively come to a standstill in the last nine months with potential investors unable to secure funding in the wake of the international financial crisis.

'Indeed, only €465m (£363m) was invested in commercial property in Ireland in the first nine months of 2008 compared with €1.6bn (£1.25bn) in the same period last year.

‘Reducing the rate of stamp duty on commercial property to a more equitable 6% could mean that international investors, who have heretofore avoided investing in Irish commercial property, may now be encouraged to invest here.

'This move will not solve the slowdown in the commercial property sector but it should help stimulate some buying activity. In terms of generating Government revenues, 6% of some transactional activity in the commercial property market is ultimately better than 9% of nothing.’