Could you handle your property tax bill doubling?
When property taxes were introduced in Ireland in mid-2013, property prices had fallen by over 50% from the pre-bust highs. The worst recession since the Great Depression was raging and almost 100,000 mortgage holders were in arrears on their mortgage repayments.
Property taxes were assessed on the prevailing market prices and in 2015, the then Minister for Finance, Mr. Michael Noonan decided to delay any reassessment of taxes until 2019 which meant that homeowners would not face a rise in property tax as a result of rising property prices.
But 2019 is now less than 18 months away and homeowners across the country may be wondering what their future property tax bill might cost them.
Since property prices are linked directly to the value of a particular property, rising property prices impact the taxable amount homeowners are liable for. Across Ireland and due to the shortage of property available for sale, property prices have been pushed up as a result. In fact, property prices have risen by 50%, 60% and a lot more since 2013 in some places.
Prices have risen sharply in recent months with the relaxation of deposit rules for first time buyers, which were cut from 20% of the property price to 10%. With first time buyers the largest segment of the property market, their access to credit was made easier with lower deposit requirements.
Whether or not property tax should increase in line with property prices is a hotly debated issue globally. For homeowners, the tax can become a runaway cost that has no correlation to actual take-home pay. Additionally, if the cost of local services is effectively managed, the case for rising tax bills should be made to property owners first. After all, it should not cost 50% or 100% more to deliver local services just because property prices were pushed up due to a temporary shortage of property.
A few options for Government may be:
- It chooses to push the issue of reassessment out into the future keeping tax bills the same as they are currently.
- It goes ahead with a reassessment of property values but reduces the taxable rate of .18% where it could engineer little or no rise in property tax bills.
- It goes full steam ahead with the reassessment and leaves the taxable rate unchanged resulting in a rise in property tax bills.
With the clock ticking towards 2019, property owners will be right to wonder how their household finances could be impacted by the final decision of Government on the issue.