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Lenders have had a bonanza in providing
commercial/investment mortgages during the current boom period.
Loans are available on property investment in both
Ireland and overseas.
Most lenders base the interest rates
on commercial mortgages on the Euribor European inter-bank base rate. Lenders usually
charge a margin on the Euribor
rate, depending on the risk to the bank associated with the individual
deal and the cost of funds. It can vary from a fraction of 1 percent to
as much as 3 percent.
Lenders also generally make a
facility charge and that depends on the level of competition and
financial strength of the borrower.
Under the Consumer Credit Act 1995, lenders must quote
an annual percentage rate (APR) when advertising residential mortgages.
However, this requirement does not apply to commercial mortgages.
The APR represents the overall cost of a loan.
In the 2002 Budget, the Government reversed
measures that it had previously introduced to
discourage investment in rented residential property, which was viewed
as boosting the housing bubble.
In recent years,
rentals from residential investments have not match outgoings and
capital appreciation has been the primary incentive.
Tax Incentive
Schemes
Urban
Renewal Schemes were first introduced in October, 1985 to
encourage renewal in rundown urban areas. Later a related
Rural Renewal Scheme was introduced and tax incentives were provided for
holiday home developments, car parks and nursing home investments.
The
incentives are primarily tax-based and target investors
in and occupiers of properties in designated areas. In
the 2004 Budget, the Minister for Finance extended
the deadline for completion of the schemes to July 31st
2006.
Political pressure
resulted in a huge extension of the incentives during the Celtic Tiger
property boom and the tax relief is available against rental income
added about 20 per cent to the prices of apartments in Dublin 7 area in
central Dublin where it was possible to compare similar properties where
one development had the incentive.
Most big earners
invested in the tax incentivised properties and multimillionaires were
able to pay zero tax on their income as a result.
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