Investment climate and market trends
The commercial and residential market in Ireland is expected to remain strong in 2019. The Irish residential property market remained stable in 2018, with the National Residential Property Price Index increasing by 8.44% (adjusted for inflation ) between January 2018 and October 2018, according to the Global Property Guide.
Specifically, house prices increased by 8.57% (7.61% inflation adjusted) and apartment prices in Ireland increased by 9.74% in the year to October 2018 (8.77% inflation adjusted), according to the Global Property Guide. According to Standard & Poor’s, residential properties should continue to rise in value as supply catches up with demand and the labor market tightens further.
When it comes to commercial real estate, experts are predicting a strong 2019. Domestic investment transactions above €1 million ($1.13 million) in the Irish commercial property investment market totaled nearly €600 million ($675 million) in the first quarter of 2019, according to the World Property Journal.
Whether for commercial or residential purposes, the process of buying property in Ireland is not as difficult as one might imagine for non-residents. There are, however, considerations that potential buyers should understand when buying property in Ireland.
Most importantly, prospective US buyers should use an experienced Irish Solicitor, a ‘solicitor’, with experience in dealing with real estate transactions, who can guide you through the process and ensure that your best interests are protected.
Are there any restrictions for non-residents buying property in Ireland?
- There are no restrictions on non-residents buying property in Ireland.
- Owning a residence in Ireland does not entitle the owner to residence. Residency and the right to remain in Ireland depends on an individual’s particular circumstances.
- Owning commercial property in Ireland does not entitle a non-resident to carry on business there. Only European Union nationals can operate a business and live in Ireland without restriction under the general principles of European Union law.
- Businesses owned by non-EU nationals must have at least one director resident in Ireland for the business to operate on the property.
Taxation
Taxation should also be considered from the outset to include the most tax efficient structure for holding property. Due to the influx of foreign investment and market experience since the economic downturn, a number of structures can be considered dependent on the level of investment. A general overview of tax considerations is provided below.
- An acquisition tax: a stamp duty is levied at the time of purchase, 1% up to €1m, 2% above 1m on residential properties and 6% on commercial properties
- Capital gains tax applies to capital gains on disposal: currently 33%.
- An annual charge (known as ‘local property tax’) of up to 0.18% of the market value of residential property in Ireland up to a value of €1 million, and up to 0.23% on the market value balance in excess of €1 million must be paid to the Inland Revenue by January 10 of each year in respect of “buy to let” residential properties.
- A tenant of a non-resident landlord is required under current tax law to withhold 20% of the annual rent and pay it to the tax authorities (unless the non-resident landlord has a collection agent) to be assessed for the tax on the rent of the rental property.
- Value Added Tax (VAT) will also need to be taken into account in the context of commercial real estate.
The buying process
Typically, a property is identified, potentially through an agent, and terms such as price, time to close, etc. are agreed and commit to a non-binding “Head of Terms/HOT” and usually a refundable “reservation deposit” is paid. Once the HOT has been agreed and the reservation deposit paid, the contacts will be delivered to the lawyer retained by the buyer. Completing the purchase from HOT to closing the deal and taking possession of the property can take six to eight weeks for residential real estate, assuming there are no delays no complications. This period is likely to be longer if financing is required and 12-16 weeks is more realistic for non-resident buyers and this time frame should apply to commercial real estate.
Why do I need a lawyer for a real estate transaction?
A solicitor works on behalf of the buyer and handles all legal formalities throughout the property buying process. The main areas in which a solicitor advises are title/planning, due diligence, negotiation of contract terms, completion of the transaction, payment of stamp duty, transfer of title and registration of the property. property after completion. The lawyer will review all existing leases and advise its terms and pitfalls. The solicitor will also advise on management structures where the property is part of a larger structure (apartment block/large building etc.).
The transaction is generally conditional on a satisfactory architect’s report on the structure of the property and a bonded surveyor/architect is retained for this purpose.
Property registration—Upon completion, your attorney will pay the balance of the purchase funds on your behalf, which will also include any apportioned amounts relating to the annual service fee for the property (where the property is located in a managed estate and a corporation management manages the common areas of the domain) and the local property tax. Once the transaction is complete, your solicitor will pay the stamp duty for the property on your behalf and register the deed of purchase with the relevant property registration authority.
Other points to consider
- Drafting and execution of an Irish Will providing for the disposition of the property on the death of the owner;
- Ongoing management and tax compliance, etc.
Conclusion
Whether you are looking to buy residential or commercial property in Ireland, Americans and other non-residents will benefit from the advice of an experienced real estate solicitor who is familiar with local regulations, and who will negotiate on your behalf and protect your best interests.
