The new Residential Zoned Land Tax, imposing a tax of 3pc of the value of undeveloped residentially zoned land, which is deemed serviced, is another misguided effort that will probably slow new supply.
he tax becomes payable next year and not surprisingly, the draft maps showing which lands will be taxed have produced a cascade of legal submissions from landowners, which will bury local authority staff in paperwork.
The tax is based on a misapprehension that developers are engaging in land speculation and delaying construction, in the expectation that values will keep increasing, thereby producing higher profits at some stage in the future.
Firstly, buying land is a gamble. It will surprise many but there is in fact no market for buying and selling land between developers. Developers just don’t sell to each other. It’s hard enough to acquire a decent site and it doesn’t make sense to then sell it to a competitor.
The sites that do come onto the market are invariably one-off sales by private vendors and State bodies.
Commentators also usually ignore the glaring fundamental fact about buying land – there is no income! For many years. Buying land probably doesn’t even meet most definitions of an “investment”.
Commentators also usually ignore the glaring fundamental fact about buying land – there is no income!
Developers buy land in the hope that they can build buildings which they can rent or sell, at a profit. If they are not building, it is because market conditions make development unviable. Developing land is a long-term proposition.
Even the most experienced developers, in the enthusiasm around buying a landbank, will underestimate by at least half the time it will take to finish the scheme.
Most small domestic building jobs and the vast majority of public buildings and infrastructure projects end up over time and