The tax reduction on first-time property purchases if for one year only
People seem to have run away with the idea that it’s permanent. But this is yet another measure made for the headline – just like ‘we increased students’ stipends’, when the increase is a totally risible Eur16 a year.
Now the government can say that it cut tax on property purchases for first-time buyers, but hang on, what does this mean in reality?
It’s not going to lead to an increase in the amount of property sold to first-time buyers. First-time buyers buy anyway – it’s a fixed market. It’s not as though the prospect of saving Eur5,200 is going to create first-time buyers where there were none, by persuading young people to stop living with their parents or renting flats, or – even less likely – persuading young couples to buy a place together who wouldn’t have done so anyway.
So what’s going to happen is this. Between now and January, there will be no first-time buyer contracts on property because they are all going to postpone them to January. Then the people who were thinking of buying their first house or flat in 2015 and maybe even 2016 will see what they can do to bring their purchase forward to 2014, to save that Eur5,200.
So this month and next month there will be no first-time buyer contracts, then there’s going to be a glut of them next year, and for a year or two after that, practically nothing at all.
It looks like this has been done for one reason other than just the headlines, after all: to bring in, over the course of 2014, all the tax-on-contracts money that would ordinarily have been brought in over the course of two or three years.
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In my opinion the benefit of this measure will disappear because of the increase of tax on cement. Property prices will go up and what tax you do not give to government you will hand over to the contractor..
Another point to consider is that it’s the first-time buyers who generally set off a chain-reaction of property purchases, meaning that it’s not just the first-time buyer’s market which will be at a standstill till January, but also that of people moving onto their second homes.
If one looks at the budget carefully, one will see a number of similar gimmicks.
1. The removal of the government’s architect for stamp duty purposes, replaced by a need to get your own architect to sign the valuation (and whom you will need to pay) coupled with an ex officio assessment by the VAT department on the correctness of VAT paid to contractors.
2. The reduced tax rate for part-time footballers (?).
3. The removal of the CVA from 2pm onwards on weekdays and Saturdays for Valletta, replaced by an increase in the price of unleaded petrol and the cost of car licences (across the board, not just if you go into Valletta).
4. The car VAT refund – payable over 7 years.
Those are just a few of them.
I think this is a very good measure…maybe one of the few decent ones….
Yes – if it was a PERMANENT ONE, and not just for one year.
I don’t agree…the sector needs a kick start!
I am in the business and first time buyers have been slowing down for the past 2/3 year.
I do believe this measure will get things going…mind you young couples may save up to €5000 in stamp duty…that translates to a 12 month mortgage repayment.
Daphne not sure you are completely correct there, local banking history shows that such credits will have an upward effect on the price of the property. What worries me more is:- what is going to happen after the year…..are prices or sales going to drop bringing on a property recession?
“What worries me more is:- what is going to happen after the year…..are prices or sales going to drop bringing on a property recession?”
Probably the Minister will extend the scheme into the following year come the 2015 budget. Limiting the scheme to 1 year for the time being is a marketing gimmick intended to maximise revenues in 2014 until the Passport Sale scheme takes off.
I dare say the government is giving a discount to first-time buyers so that they will spend the discount on their property instead.
So basically the government is forfeiting €5200 so that contractors and developers can get them instead. Nice way of repaying election dues and promises without actually looking bad.
This incentive will have promises of sale being extended into next year, rather than having the final contract signed this year.
What if vendors do not want to extend those agreements, if they have commitments of their own? It’s going to cause more uncertainty in the market with a whole lot of pressure on notaries.
The bill does not specify how first-time buyers are to be identified. Will notaries have to order searches on the buyers to determine whether they truly are first-time buyers or is a declaration to this effect enough?
Are those who have inherited property, as against buying it, disqualified from enjoying this rebate should they be interested in buying for the first time?
He’s basically cutting and pasting from the MDA’s ‘proposals’.
There’s no design we’re talking here. Just plain vested interests.
Watch out for BOV.
We need to specify this will only be available for couples and not for single persons.
[Daphne – You would think that single people would be in greater need of help, buying a flat on their own, with one income.]
On what basis will ‘a couple’ be defined?
Exactly. Thank you.