Ireland will increase a tax on the bulk buying of homes, amid growing outrage over investment funds hoovering up real estate and squeezing out first-time buyers.
The government will raise stamp duty to 10% on purchases of 10 or more residential houses, Finance Minister Paschal Donohoe said late on Tuesday in Dublin. The current levy is 1% on homes of below 1 million euros ($1.2 million) and 2% above that level.
The increased tax will apply to bulk purchases as well as the acquisition of 10 or more units over a year, though not to apartment blocks.
The decision comes amid growing tensions over investors buying up homes to lease out. The recent mass purchase of nearly 80% of a development by Round Hill Capital LLC set off a storm, prompting the government to act in a bid to quell political criticism led by Sinn Fein. So-called cuckoo funds are viewed as amplifying a housing crisis driven by lack of supply.
The 10% rate “is designed to dissuade the practice whereby institutional investors buy up homes that are close to completion, or fully completed,” Donohoe said in a statement. “Ensuring that people have access to home ownership in this country is a priority.”
Last year, Ireland had a shortfall of about 13,000 homes, according to the government. However, international investors sometimes provide funds needed to close that gap, their defenders say.
Local authorities and approved housing bodies will be exempt from the levy in the proposal Donohoe will bring to Ireland’s parliament Wednesday.
Separately, the government announced plans to ringfence as much as 50% of new developments for owner-occupiers.
Shares of property investment firm Irish Residential Properties REIT Plc rose as much as 3% in Dublin on Wednesday following the announcement.
The changes are “probably better than feared by many in the industry,” Goodbody economist Dermot O’Leary said. However, he said “they do not address the blockages to housing supply that exist in Ireland currently.”
(Blomberg)
