Life after the bubble
Since Ireland’s infamous property bubble burst amidst the general banking crisis of 2008/2009, property prices have fallen dramatically. 2015 has seen stability return to the property market reflecting the progress that has been made in rebalancing the public finances, the country exited its EU/IMF assistance programme in December without recourse to an emergency credit line and employment levels are at their highest in some years. There is now a growing sense that Ireland’s economy is on a sustainable recovery path and confidence and stability are returning to the market.
Why is now a good a time a buy in Ireland?
This change brings with it fresh speculation as to how the property market will perform in 2015.
However many banks are still working through their distressed loan portfolios and many boom-time landlords are now offloading their investment properties. The upside of this is that there is still value in the Irish market for foreign buyers. Given the current strength of sterling to the euro, this value is even more significant for UK buyers.
What value can be expected from the Irish rental market?
If you don’t intend to move into the residential property yourself, rental yields can be solid with a good tenant. Presently 700,000 Irish people live in leased houses and apartments. That number is increasing every day. Almost 10,000 tenants are currently joining the rental sector every month. Many of these people would prefer to own their home but they can’t currently obtain a mortgage due to the increased rules and regulations recently introduced on mortgage buyers by the Irish central bank. Rent has increased across the island of Ireland in 2015 with average monthly rental amount being €1,573 in south country Dublin, €889 in Cork City and even Kerry rents are now €617 on average.
How do foreign property buyers acquire Irish property?
The good news is that there are no restrictions for foreigners purchasing real property in Ireland and the investment climate is favorable for foreign businesses.
The Legal Process
Once you find a suitable property, make an offer and engage the services of a solicitor. The offer does not legally bind you to buy. When your offer has been accepted, you may if you wish, arrange for a survey for early detection of potential problems. Your solicitor will then draft the Deed of Conveyance. This will be sent to the seller’s solicitor for his approval.
The vendor’s solicitor will then draw up a contract for the sale of the house. Once your solicitor has reviewed this contract and is satisfied with it and to the title of the property, you are now in a position to sign contracts. At this point you hand over a non-refundable 10% deposit. Estate agents are involved in the transaction until seller signs a contract with a chosen buyer. The balance of the purchase monies are only paid over to the seller when the solicitor is satisfied that you will acquire good and marketable title to the property. The conveyancing of the property usually takes 6 to 8 weeks.
When purchasing or selling property in Ireland the buyer and the seller each employ their own solicitor. A purchaser should always retain a solicitor who is independent of and not associated with the solicitor acting for the seller or the seller’s estate agent. Once Irish property is acquired it is a good idea to have an Irish will in place to provide for the disposal of the property on your death taking into account the Irish law requirements and gifting the property in the most tax efficient manner possible.
Taxes
• Stamp Duty
The stamp duty rate for residential property is 1% on the first €1,000,000 and 2% on the excess. Since 7th December 2011, the stamp duty rate for commercial property is 2% of the purchase price. Stamp duty should be paid at the time of conveyancing, and then the sale of property is registered at the Land Registry Office or at the Registry of Deeds.
• Income Tax
All rents or income arising from the property for the benefit of an owner who is not resident in Ireland are taxed at the rate of 20%. Where the owner requires such income to be paid to him abroad the tax should be deducted from any rent due by the tenant and paid directly to the Irish Revenue Commissioners. If an agent is employed in Ireland this tax does not need to be withheld by the tenant.
If the owner becomes resident for tax purposes in Ireland, then his income will be taxed at between 20% to 41% subject to personal tax allowances and an allowance for tax already paid abroad. Income tax returns are required to be filled annually with the Irish Revenue authorities. The tax year runs in line with the calendar year and is due to be filed by the 31st October of the following tax year.
• Other Taxes
Capital Gains Tax and Inheritance Tax (Capital Acquisitions Tax) in Ireland will need to be considered, but are dependent on the specific factors of the case.
How can we help?
At CPC, we can negotiate on your behalf in the purchase of properties be it commercial, residential or agricultural in nature and can introduce you to local architects, surveyors, insurance companies, solicitors, property agents, interior designers and managers of banks or other lending institutions and insurers.
With the help of our tax team, we assist non-resident landlord clients to navigate the process to register for tax, register a local collection agent and calculate accurately their income and expenditure from rental property. We work with our clients to try to identify every available expense to be claimed in order to keep Irish tax liabilities to a minimum.
Should you require our advice in relation to the purchase of property in Ireland we would be delighted to help you on a competitive basis. If you wish to avail of our services or require any further information, please send us an e-mail with, your name, address and telephone/fax number to caroline@charlespcrowley.com. or ring us on +353 88 23 8841899.
Owning a home on Ireland’s Wild Atlantic Way could be just an email away.
