CBRE IRELAND REACTION TO PROPERTY INITIATIVES IN BUDGET 2017
Dublin, 11th October 2016 – Commercial property consultants CBRE Ireland this evening reacted to Budget 2017, which contained several measures that will have direct implications for the property sector of the economy. According to the property consultants, the most frustrating element of this year’s Budget was a lack of detail in relation to proposed changes to the taxation of fund structures that have been used extensively in recent years to acquire and hold property assets.
“As had been expected, the Minister confirmed in his Budget speech today that his department have in recent weeks been reviewing the use of tax-efficient fund structures such as ICAV’s and QIAIF’s. Many transactions and investment decisions have been put on hold until such time as there is clarity on this issue so it is frustrating that investors now have to wait until the publication of the Finance Bill later this month to get clarity on what is being proposed and how this might affect them. There is potential for unintended negative consequences for the property sector and the wider economy if tax changes are implemented without sufficient consultation, particularly if the measures are implemented in a manner that affects commitments already made or assets already acquired. These include damaging international investor and occupier appetite and potentially negatively impacting the valuation of Irish real estate assets, which were purchased legitimately through these structures. While it is frustrating that more detail wasn’t contained in the Budget today, considering the potential implications, it was somewhat encouraging to hear the Minister say that his department is loath to finalise a decision on this issue until they have conducted appropriate consultation”.
CBRE welcomed the introduction of the ‘Help to Buy’ scheme for first-time buyers but warned that the scheme has the potential to inflate house prices if efforts to stimulate much-needed housing supply don’t materialise in tandem and in sufficient scale. In this respect, the property consultants say that the failure to address some supply-side impediments such as reducing the rate of VAT on new home construction was a missed opportunity in today’s Budget.
CBRE welcomed the decision to increase interest deductibility for residential landlords by 5% to 80% (and further in increments over the next few years) in an effort to support the rental market and bridge the gap with commercial properties where 100% interest deductibility applies. They also welcomed the decision to increase the income ceiling for the ‘Rent A Room’ scheme by €2,000 to €14,000 per annum which along with other measures should help to free up the supply of much-needed rental accommodation.
CBRE were particularly welcoming of the decision to retain the rate of VAT for the hotel and hospitality sector at 9%, considering the potential impact the recent deterioration in Sterling may have for Irish hotels and tourism in the short to medium term.
The property consultants were also complimentary of the decision to reduce rates of USC for some taxpayers, which they believe will support continued consumer spending and retail sales in the retail sector of the property market. They also commended the Minister for offering assurances on the security of Ireland’s 12.5% corporate tax rate, which is so vital to supporting continued flows of Foreign Direct Investment and in turn boost take-up volumes in the industrial and office sectors of the property market.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 165 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.