The Irish government has announced a 200% rise on stamp duty for commercial property in a move which experts say will be detrimental to the market.
The Irish Minister for Finance increased the stamp duty payable on the acquisition of commercial property today from 2% to 6%.
John Moran, CEO and Head of Investment of JLL Ireland, said the lift is 'of greatest concern'. 'This is likely to have a detrimental and immediate impact on property market transactions, particularly those that are currently under negotiation. It will cause an immediate reduction in the value of all commercial property, which at -3.7% will be almost equal to the increase in stamp duty,' Moran commented.
Stamp duty is a cost that is incurred by the purchaser during an investment transaction, and forms part of the overall gross capital value. The gross value will not change, but with an increase in the costs for the purchaser, that can only lead to the equivalent percentage reduction in net value of the asset.
The move may lead to a reduction in liquidity from foreign investors, as costs in Dublin and Ireland will automatically be viewed as more expensive, according to market experts.
Marie Hunt, executive director & head of Research at CBRE Ireland believes the move may deter international investment.
'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,' said Hunt. '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.'
