Property consultants Savills Ireland have said that unlike second-hand homes, 13.5% of the sale price of a new home is paid in VAT. This compares with a zero VAT rate on new homes in the UK.
A house priced at €250,000 will come with a vat bill of €33,750. However, Savills have suggested in the Irish Examiner that first-time buyers should be allowed to reclaim three-quarters of that VAT on completion of their sale, adding that this would have an immediate, positive impact on the property market.
It will make homes more affordable, it will assist in easing debt and it will create more activity in the economy,” said director with Savills, Ronan O’Driscoll.
He said the budget offered the Government a chance to restructure property taxation in such a way as to create employment and to generate substantially higher tax returns from the “oversupplied sector”.
He argued the Government should gain more VAT because he believes sales will increase.
“The VAT rebate can assist people in furnishing their home, paying down their mortgage or simply making the difference between securing a mortgage or not,” he said.
Savills said that there are about 20,000 empty houses and apartments completed by builders, which remain unsold with a further 20,000 at various stages of construction.
They suggested that the initiative will have positive implications for a range of other industries that rely on the housing market.
“Considering that it has been five years since there were new homes sold in any significant volume, we believe that there is some degree of pent-up demand, even in this difficult economic environment,” said Mr O’Driscoll.