Budget 2013: Property and NAMA
December 5, 2012 by namawinelake
This afternoon in the Dail, the finance and public expenditure and reform ministers, Michael Noonan and Brendan Howlin presented Budget 2013. All the associated documents are here. These are the tax measures. These are the cuts to services and welfare. Overall, the Government presented a positive assessment of the economy overall and confirmed that it expects to beat the deficit target for 2012 with an actual of 8.2% versus the target of 8.6% in the Memorandum of Understanding with the programme finance Troika. So, what about the NAMA and property aspects of the Budget 2013 announcements?
(1) NAMA is to ramp up its provision of residential property for social housing in 2013. This is grossly unfair on NAMA which has already made 3,800 homes available to Government which has only overseen the acquisition of 133 homes to date, including 58 in 2011. So much for environment minister, Phil Hogan’s fanfare last December 2011, indicating that NAMA would provide 2,000 homes in the short term.
(2) NAMA has spent €650m of the €2bn investment announced in May 2012.
(3) The property tax will come into effect from 1st July 2013. Residential property will be self-assessed by homeowners and the tax will be collected by the Revenue Commissioners. The tax is payable by owners rather than occupiers unless they’re both the same of course.
(4) So far, claims the Government – opponents have different figures – 66% of households have paid the €100 household charge in 2012 which was supposed to have been paid by 31st March 2012. From 1st July 2013, the Revenue Commissioners will collect arrears on this charge, and from 1st�July 2013, the arrears will rise from €100 to €200.
(5) The property charge will be 0.18% on homes worth less than €1m and will be 0.25% on homes worth more than €1m, but only on the element in excess of €1m. If a home is worth less than €100,000 then the assessed value will be €50,000. Above €100,000 there are bands of €50,000 and the assessed value will be the midpoint of the band, eg your home is worth €130,000 then the assessed value will be €125,000, if your home is worth €205,000 then the assessed value will be €225,000.
(6) In 2013 only, only 50% of the annual charge will be payable.
(7) There will be exemptions for three years for first time buyers in 2013, and buyers of homes which were previously vacant and unlived in.
(8) There will be no waivers, only deferrals so if you can’t pay, the charge will be added to a tab� which will be payable when you sell or die.
(9) In 2013, if you have a second property and are presently paying the non principal private residence tax of €200, you will continue to pay that tax in 2013, IN ADDITION to the new charge. From 1st January 2014, you will only need pay the property tax, with the NPPR abolished, but only from 1st Jan 2014.
(10) Rental income will be subject to PRSI, typically about 4%.
(11) Real Estate Investment Trusts will be introduced in 2013. REITs are managed property investment funds and allow ordinary investors to invest in property without investing large sums with tax incentives. Typically, you buy a share in a property fund and then you get income on your share from rent and if property is sold at a profit. If you want out of the fund, you can sell your share. REITs have been promised since this administration came into office.
(12) There was no change to the incentives offered in last year’s budget, but mortgage relief for first time buyers will be ended as previously indicated by the end of December 2012. However first time buyers in 2013 will be exempted from the new property tax for three years.
Estate agents and property consultants Lisney have been quick out of the gates and have provided a response to the Budget 2013 announcements. They criticise the structure of the new property tax for a variety of reasons including no account of stamp duty and that it should be on occupiers rather than owners. With respect to REITs, James Nugent, the managing director of Lisney has this to say:
“REIT’s are publically traded property companies, where the majority of the assets of the company are income producing real estate assets. This will provide liquidity to the market and will allow investors participate in areas of the property market that they would not traditionally have had the opportunity to enter, i.e. it will allow them invest small sums of money in large-scale commercial properties. Given the relatively small size of the Irish market, it is likely that there will only be a limited number of REIT’s established, perhaps two or three. It is positive that this is being introduced at a time when property values are low. This is contrary to the situation in UK when they were introduced at the height of the market in 2007 and suffered large losses within a short period of time due to the falls in property values. REIT’s are also positive from the point of view that they will provide a new source of funding for property companies. A return of a listed property sector is to be welcomed, the added benefit of no taxation at company level is good news for the investor.”
via NAMA Wine Lake.
via NAMA Wine Lake.