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Property Investing In Ireland

Prices Down And Falling, Yields Stronger Than Ever And Moving Up—This Is The Best Time In 20 Years To Buy On The Emerald Isle

Ireland is contemplating a property tax. The Irish government (like most Western governments) is in financial trouble. It is also under pressure from the EU and the IMF to institute what would amount to a modest property tax. Of course, it’s not only the Irish government that’s in trouble but the Irish people, too, so even this modest property tax is seeing heavy resistance. However, if passed, the implementation of this new tax could, I predict, help to push property prices down even further across the Emerald Isle. This is good news for investors. More on why in a minute.

Historically, Ireland has imposed no property tax on residential property. Instead, they have charged a hefty “stamp duty” (transfer tax) of the buyer on every property purchase. The Irish government got its money up front. The stamp duty percentage is currently (as of December 2010) 1% for properties changing hands for less than €1 million and 2% on property sales over that threshold. Before December 2010, Ireland’s stamp duty was a complicated and often changing tiered system, with the top rate as high as 9%.

As a property buyer in Ireland years ago, I was able to justify the high stamp duty by reminding myself that it was a trade-off for a property tax. I amortized the amount of the stamp duty over the expected holding period for the property. Now the stamp duty has been simplified and reduced and, it seems, a property tax is to follow. I think the investor could come out better in the long run. The important thing to remember, though, is to factor in the stamp duty when processing the figures for any purchase.

The government justified the high stamp duty during the country’s Celtic Tiger days as a way to try to keep a lid on real estate prices. It didn’t work. Speculation pushed prices ever-higher for the better part of two decades before the bottom fell out of this property market-cum-Ponzi scheme. Today, prices in this country have fallen to 50% and less of their peaks, and most paying attention don’t think the bottom has yet been hit.

Meantime, rents in the country are rising, as potential buyers can’t get financing from the banks (remember, the banks don’t have any money; what they do have is a long backlog of delinquent mortgages).

For the would-be investor, this is beginning to look like an interesting market–suppressed and falling prices alongside escalating rents. Rental yields are already well improved from the anemic 2% and less you could expect during the boom days. In Dublin at the moment, yields according to some reports are 7% and higher.

Ireland’s property tax hasn’t been formally approved yet, but it is expected to be part of the budget announced this December. The first half of 2013 may be the best time to buy property in Ireland in more than 20 years, whether you’re looking for a retirement cottage on the sea or an investment in euro that could generate a decent yield. Current prices in Dublin are on par with what they were in 2000 and down 60% from 2006 peaks. And, again, across the country, prices continue to fall.

While there’s no multiple listing service in Ireland, this website is a network of agencies across the country and includes a broad selection of listings. It’s a good place to start your Irish property search.

Lief Simon

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