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Jones Lang LaSalle has given a broad welcome to the property measures taken by the Minister for Finance in yesterday’s Budget speech
Dublin, 7 December 2011 - The removal of the uncertainty about upward only rent reviews in existing leases is a considerable relief to a market which has been suspended for almost a year awaiting an answer on this topic. Implementation of the proposed changes would have protracted the uncertainty, as the scope for confusion and legal challenge was almost unlimited. We believe that the vast majority of landlords are engaging and reaching agreement with struggling tenants, and taking a pragmatic approach to rent reductions. There is a minority of landlords who will not engage and it is hoped that the example set by NAMA in setting a protocol will be followed by other lenders and landlords.
The stamp duty change from 6% to 2% is also welcome. It brings stamp duty into line with other European norms, and in a world of low returns and risk, it reduces the hurdle investors have to reach to break even in the first couple of years.
The Minister has a difficult task to balance raising income with promoting growth, and Jones Lang LaSalle believe that he has shown imagination with the CGT exemption provision for those who purchase property between 7th December 2011 and 31 December 2012 and hold for seven years. This should encourage activity while avoiding any ‘short-termism’.
It is hoped that some stability will be brought to the Eurozone in the near future – this is beyond Irish control. However yesterday’s provisions on Upward only Rent Reviews, Stamp Duty and CGT respectively restore good order to Landlord and Tenant law; reduce the barriers to entry for investment; and encourage investors to act during 2012. None of this will artificially raise the price or value of property – prices will recover only when economic and investment fundamentals are right – but it should encourage a rise in the volume of transactions. Transactions will set proper market pricing and allow decisions to be made based on evidence; in short, a return to normal market functioning.
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