Irish budget offers relief to housebuilding sector

Irish minister for finance Paschal Donohoe announced a raft of changes to tax measures around apartment sales, rentals and construction in a bid to increase supply for first time buyers.

VAT has been reduced on the sale of new apartments from 13.5% to 9% until the end of 2030, with an enhanced corporation tax deduction being introduced for the construction of new apartments.

The deduction will allow 125% of the actual cost of construction incurred – up to a cap of €50,000 – for firms developing 10 or more apartments.

Rental profits on ‘cost rental’ properties – a not-for-profit initiative introduced in 2021 where rent levels are designed to cover the cost of the construction, management and maintenance of a property - will also be exempted from corporation tax, in a bid to help reduce rents, with the expectation properties are offered for at least 25% below market value.

Louise McQuaid, a real estate expert with Pinsent Masons in Dublin, said the budget announcements would mark a pivotal switch in Ireland’s approach to housing – particularly for the apartment sector.

“The measures announced are a welcome and pragmatic response to long-standing challenges in housing supply, viability, and investor confidence,” she said.

“The reduction in VAT on the sale of completed apartments from 13.5% to 9% is a particularly impactful move. This change directly addresses the financial barriers that have stalled many developments, especially in urban areas where apartment construction is most needed.”

“Coupled with the enhanced corporation tax deduction of 125% on qualifying construction costs, the budget sends a clear signal: the government is serious about making apartment delivery financially viable. While implementation and market response will ultimately determine the success of these measures, Budget 2026 lays a strong foundation. It represents a shift from reactive policy to structural reform, and if sustained, could significantly improve housing delivery and investment outcomes in Ireland,” she said.

Along with the tax cuts, Donohoe announced a new derelict property tax, to be introduced next year at a rate of tax not intended to be less than 7% of the site market value; and an extension of stamp duty refunds to 2030 where the land is developed for housing.

Donohoe told the Dáil: “For first time buyers, for aspiring homeowners, and for those attempting to navigate the rental market - increasing supply is key”.

“Government is determined to use all policies at our disposal to increase supply and alleviate pressure, so that more people can access a home.”

He added: “These measures are designed to encourage more stock into the housing market and to support the development of higher quality homes.”