Wexford Rentals & Property Management have read that Irish investors who want to buy property here are working with “one hand tied behind their back” because of the onerous tax regime on the property sector today.
Wexford Rentals & Property Management agrees with Jim Clery, who heads the real estate division for KPMG, who said there was little hope of Irish buyers emerging in the years ahead other than the big pension funds and REITs. “The CGT rate is very high at 33pc, while the rental income is charged at the 55pc income tax rate by the State. – Irish taxes on property are very high. The result is that an Irish investor who sees a property they want to buy is playing with one hand tied behind is back if he is up against an investor from overseas.”
The sheer size of international firms which have been involved in the market means they have been able to structure deals in ways that minimise their tax liability. REITs are tax friendly as well, while Qualified Investor Funds, which have become popular in recent years, are also a very tax efficient structure. “That is all well and fine in the short term,” said Mr Clery, “but we need to look two or three years down the road, when some of the buyers from outside Ireland start to sell down some of their assets. This is already happening to a degree, but there have been few if any notable deals involving Irish firms outside of the REITs and tax free funds. Eventually there will have to be a new wave of Irish buyers and right now, there is no prospect of that happening. It’s good to see both international and REIT participation in the Irish commercial property market. In general, it’s a sign of growing confidence in both the sector and the wider economy. What’s left to happen is to see the return of the domestic buyer.”
One of the hallmarks of this recovery in the market has been the fact that almost all the buying has been done by overseas buyers.
The trend has been a continuos one since 2012, when US buyers in particular started to buy Irish property in large numbers. Mr Clery’s words come ahead of a major conference on the commercial property sector this week, at which the next steps in the recovery will be discussed in detail among other topics.
The Commercial Property Summit will be at the O’Reilly Hall in UCD on Thursday. For details including how to register, contact Eunan O’Carroll on [email protected]