Although Ireland traditionally prides itself on its stable tax system, stamp duty continues to be the exception that proves the rule. In 2017, as part of a number of other changes, the rate of stamp duty on commercial real estate acquisitions increased to 6%. This year, there is speculation that rates will also increase on residential property transactions involving multiple units, such as blocks of apartments or mixed use developments.

Currently, stamp duty on residential property is 1% up to the first €1m of consideration and 2% thereafter. Typically acquisitions of multiple units will be carried out by institutional investors and subject to the 2% rate. It is rumoured that this will increase to 6%.

This is attracting significant market commentary, with investment analysts predicting a direct negative impact on valuations of funds and entities holding large residential units.

It is also possible that such a change could dampen investment in newly built stock intended for the institutional landlord sector. As part of the 2017 stamp duty changes a refund scheme was introduced for development land. Essentially, development land is subject to a 6% rate on acquisition, however if residential units are completed on the site, a refund of 2/3rds is provided. This brings the effective rate to 2%. The incentive effect of such a policy may be impacted if a 6% rate is applied on the subsequent sale of such units in a large scale transaction.

Those currently involved in residential transactions may well be advised to seek to enter into contracts prior to Budget Day (9 October). Traditionally, any increase in stamp duty rates would only come into effect for property contracted after the increase is announced.

{A move to increase stamp duty on residential investments would be the latest such policy shift in the market in three years at a time when supply remains at an all-time low for residential rental stock.