Most estate agents believe that the Budget won't help get the market moving - but some see it positively.

THE REDUCTION of tax relief on interest for investors to 75 per cent and restricting mortgage interest relief on homes to the first seven years were criticised by both of Ireland’s auctioneering bodies in their reaction to this week’s Budget.

And agents generally believe that a complicated “trade-in” scheme – which would allow builders to take a second-hand home in part exchange for a new property, without paying stamp duty on it until they eventually sell the older home – is unlikely to work.

However new homes specialist Ken MacDonald felt that the Budget was a serious attempt to deal with the nation’s finances that would in time get the housing market back on track.

He said that the trade-in scheme could be helpful in some cases where it might suit a developer and a purchaser – although “there’s so little detail I couldn’t pass judgement until we see the Finance Bill. It’s a small positive, but it is a positive.” As for the abolition of mortgage interest relief after seven years, he said: “I don’t think that will do any real harm to the market.” He also believes that the reduction in investor tax relief won’t be detrimental.

The changes in this week’s Budget will have no significant effect on the property market, said Edward Carey, the president of the Irish Auctioneers and Valuers Institute (IAVI), who said: “This is a missed opportunity to create more transactions and generate more VAT and Stamp Duty revenues.”

The reduction of interest relief for investors will be a disincentive, he said, adding that investors are necessary for the provision of good quality rental properties.

He said that the stamp duty trade-in scheme would have a minimal effect “as it will arise in very few cases”.

He also said that there had been nothing to entice first-time buyers into the market but added: “We hope that the restoration of normal credit facilities coupled with the correction in property prices that has taken place will increase activity.”

The Construction Industry Federation (CIF) also called the Budget a “lost opportunity to stimulate activity” in the market and to unlock an estimated €1.1 billion in outstanding VAT payments tied up in unsold homes.

The restriction of mortgage interest relief and the reduction of tax relief for investors were both “negative measures which would continue to depress the market and hinder revitalisation” said the president of the Institute of Professional Auctioneers Valuers, Alan Redmond.

“What we need now are incentives to give people confidence to go out into the marketplace and make purchases,” said Mr Redmond. “There is nothing in the Budget which provides that confidence.”

Mr Redmond added that the trade-in scheme appeared complex and would require further study. The measure will be outlined in the forthcoming Finance Bill due out after Easter.

Paul Grimes, chairman of Real Estate Alliance (REA), which represents 38 agents around the country, said that as a way of getting new housing stock sold, he did not think that the trade-in scheme was a workable solution.

The abolition of mortgage interest reliefs would not help either, and would not be a stimulus to the market. And he added: “On a general point, I believe the Budget looked far too much to taxation and not enough to the Government cutting its own costs.”

Agent Knight Frank in Dublin also believed that the Budget was a missed opportunity which “has done nothing to stimulate business activity across the economy, nor provide relief to homeowners and aspiring homeowners and in general to assist the already beleaguered and struggling property market.

“The changes in CGT are a further disincentive to property market transactions; the reduction in mortgage interest relief to the first seven years is a strong disincentive to homebuyers.

“We are highly concerned that the reduction to 75 per cent in tax relief for residential property investors will prove a serious disincentive, particularly with rents continuing their downward spiral. The new stamp duty trade-in scheme is totally confusing and will do nothing, virtually, to help the market and has no immediate effect on generating revenue.”

However, commercial agent Jones Lang LaSalle broadly welcomed the Budget. Managing director John Moran said: “This Budget is a first meaningful step to help create certainty and some future visibility on the economy. Without a clear national or personal financial plan, everyone has been floundering. Elements of the property investment equation are already repaired, others will take a little more time, but a return to lending is vital to recovery and today’s Budget measures bring us a step closer to that.

“The increase in Capital Gains Tax is less welcome but is unlikely to be a major deterrent at present. Stamp Duty measures to encourage house purchase activity of both new and second-hand homes should be positive although they may take some time to filter into actual benefits for the residential and land market.”

Threshold, the national housing organisation, said that any reduction in the level of rent supplement should be fairly directed and not put people at risk of homelessness.

“It is not clear where exactly the axe will fall in this Budget but, over time, those who are dependent on social welfare will suffer,” said Aideen Hayden, chairperson of Threshold.

“Specifically, in relation to rent supplement, Threshold does recognise that rents have fallen. However, in high-demand areas – where you are most likely to find bedsits – rents have remained high. An across-the-board reduction in rent supplement would have the effect of squeezing some of the most vulnerable out of the rental market completely and, ultimately, they will be at risk of homelessness.”