Taxes Stifle Housing Rebound
Regrowth in the Irish housing market is being hampered by an outdated tax policy that is misaligned to deal with the housing crisis.
That's the contention being voiced by Douglas Sadleir, solicitor and chartered tax advisor with FitzGerald Solicitors in Cork.
Sadleir is trying to stoke coals under the government in the hope that its current tax policy will be updated. “The current tax policy for property development contains an anomaly that is a relic of the over-stimulated property bubble in 2006 and 2007 and the planning tribunal controversy,” said Sadleir.
“At that time there was rampant speculation, with farmers and other landowners making huge gains on sales of lands adjacent to towns and cities.
"The planning tribunal also uncovered massive gains in lands due to planning decisions and rezonings, some of which were made because of bribes and lobbying.”
Sadleir (pictured) argues that the government's response – the introduction of a capital gains tax of 80% on profits relating to planning decisions and land rezoning – was a knee-jerk reaction that continues to stifle new construction projects.
He said: “No property owner is going to even consider relocating where to do so would result in an 80% tax on any potential gain.
“While there was clear merit in the thinking behind this legislation, it was not properly thought out and has very quickly become outdated.” Sadleir adds that Dublin is bearing the brunt of the current consequences of the tax, although Cork is not far behind.
“We are seeing an increase in property transactions in Cork city and its surrounding areas. There have also been a number of small developments in good areas at bid and commencement stage.”
Sadleir continues: “Developers are looking towards building small clusters of houses and financing their next developments from sales. There are some indications that banks are willing to lend but on very conservative models.
"These developments are based on existing planning and zonings, but it is only a matter of time before rezoning becomes an issue.” (August 2014)