On Friday, Ministers approved VAT increases which will see VAT payable on new property purchases increasing as of 1 January 2013 from the current 4% super reduced rate to 10% (reduced rate.)
The date of January 2013 has been selected as this will give all of those looking to purchase a new property before the increased VAT rate is implemented, time to purchase at the reduced rate.
The government has also decided to eliminate the fiscal deduction made for a habitual residence.
The Minister for Finance made it plain during the press conference following the Cabinet meeting that this decision had been made in line with recommendations from the EU.
Economists have already calculated that those purchasing now could save themselves a considerable amount of money in the long run if they buy now, particularly for those intending to take out a mortgage in order to buy a property.
For example, it's been calculated that an individual purchasing a house for an average mortgage of €99,600, with an interest rate payable of 4%, and a duration of 21 years, could actually save themselves €23,469 during the lifetime of the loan by making a purchase before the new rules come into play.
Those purchasing a new property for 180,000 outright would save themselves €10,800 in VAT by buying before 2013.
The measures have met with a mixed reaction from the construction sector and property professionals.
Some consider that whilst the imminent increase in VAT may incentivise some first-time purchasers to take the plunge before the beginning of next year, others feel that the measures will do little other than encourage price cutting in existing stocks of apartments as vendors compete to sell stock properties
The VAT rates only apply to new properties, being sold for the first time.
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