This is the first Budget in many years that has contained only relieving measures for the property and construction sector, write Jim Clery and Carmel Logan of our Real Estate practice.
It is clear that COVID-19 has had a significant impact on projects, productivity and viability in the sector. The Government has introduced several targeted extensions to various schemes to take account of the delays being experienced by the construction industry and the current housing crisis.
The Help to Buy scheme for first time buyers has been extended to the end of 2021. The enhanced scheme was introduced as part of the July Stimulus Plan to apply from 23 July 2020 and had been due to end this year.
The enhanced scheme provides for a refund of up to 10% (up from 5%) of the cost of a new house, subject to a maximum refund of €30,000 (up from €20,000). To qualify for the relief the value of the house must be no more than €500,000 and the relief is subject to taking out a mortgage of at least 70% of the value of the property. The refund remains dependent upon the buyer having paid sufficient income tax in the previous four years.
As part of the affordable housing measures package for 2021, €110m will be provided to deliver a new national Affordable Purchase Shared Equity Scheme for first time buyers and a new funding model to accelerate the delivery of affordable houses by approved housing bodes. No further details are available on this scheme yet.
In our view, this scheme has played a key role in increasing the level of construction of new homes in Ireland and in that regard, the extension of the enhanced scheme is warranted and beneficial.
The Stamp Duty Refund Scheme for residential land was introduced in Finance Act 2017. It provides for a refund mechanism to reduce the net effective stamp duty rate for qualifying residential developments to 2%, where higher stamp duty had been paid on the acquisition of the land.
The scheme was designed to incentivise residential development. However, the conditions to meet this refund scheme are onerous and subject to relatively tight time limits for both commencing and completing the development of the residential project. Satisfying these time limits has been made even more challenging by the impact of COVID-19 related restrictions on construction activity.
The scheme was due to expire for new construction commencing after 31 December 2021, but has now been extended by one year to 31 December 2022. In addition, the previous 24 month timeline between commencement of the development and completion has been extended by 6 months. The extension of the scheme and the period in which the development must be completed are welcomed and will hopefully ensure that developers impacted by COVID-19 closures and delays can still avail of the relief.
The refund scheme applies to both the construction of once-off houses as well as multi-unit developments that can involve a portion of commercial development. To date only approximately 8% of applications relate to multi-unit developments. Further changes to enhance the availability of the relief for multi-unit developments would be of considerable assistance.
The Government have extended the commercial rates waiver that was introduced in March 2020 and due to expire in September 2020, to the end of 2020 to support eligible businesses impacted by COVID-19. The Government will make payments to local authorities to offset the cost of waiving the commercial rates. This will provide relief to businesses as well as certainty to local authorities in ensuring that they continue to be resourced to provide local services.