From a real estate perspective, Budget 2022 was relatively quiet, however a number of measures will have an impact for those in the market.
Firstly, the announcement of a Zoned Land Tax will have caught the attention of many. Although largely rumored, questions have emerged none the less. The zoned land tax will replace the existing vacant site levy which came under heavy criticism for administration difficulties and therefore poor implementation. For example, the period of January to October 2020, only four of the 31 local authorities had successfully implemented the levy. At the outset, this tax is set to apply to owners of zoned residential and mixed use serviced land. The tax is to be based at 3% of the market value and there will be a lead in time of two years for land zoned before January 2022 and three years for land zoned thereafter.
The major change to the previous levy is the focus on zoned land rather than vacant sites and the administration by revenue rather than local authorities. If implemented properly, Cushman & Wakefield expects today’s tax to increase the volume of land brought to the market and subsequently developed on. It may see more zoned land being sold without planning or on a subject to planning basis. However, once again the key to this policy are the details and of course it’s execution. Questions Cushman & Wakefield will be looking for clarity on in the Finance Bill include, what constitutes serviced land? What is meant by lead time? Will the tax include land owned by Government bodies and religious orders? How will it treat sites going through the planning process and what are the exemptions alluded to?
Commenting on the change, Aidan Gavin, Managing Director, Cushman & Wakefield added: “In order for this policy to aid the development of more housing, we reiterate the need for a review and rethink of the planning process. This levy in isolation will not solve the issues relating to the delivery of new housing, with the planning process continuing to be considered a stumbling block.”
Of interest to the hospitality sector, was the announcement of the extension of the commercial rates waiver for quarter four, targeted at the hospitality, arts and certain tourism related sectors. Additionally, the reduced VAT rate of 9% for the hospitality sector will remain in place to the end of August 2022. This is welcomed for an industry which has recorded significant declines over the course of COVID-19. In Dublin, hotel occupancy levels declined to below 30% in March 2020 and have remained at low levels since then, with single digit figures recorded for large periods also. August 2021 marks the first turn in this, with a recovery level of just over 50%, however the sector has some way to go to return to strong trading levels.
Lastly, the increase of the carbon tax by another €7.50 this year to €41 per tonne will be of interest also. Commenting on the change, Aidan Gavin, Managing Director, Cushman & Wakefield noted: “Today’s announcement gives more weight to the case being put forward for a green premium versus the brown discount. Rising carbon taxes further emphasises the differentiation in new and older stock in the market. Construction activity at present is pushing towards high standards with many office blocks seeking LEED accreditation. For older stock, which is not refurbished, the cost of managing this unit will continue to rise into the future and therefore a decision as to how best to manage the asset will need to be made.”
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