During the halcyon days of the 1990s, it was difficult for many people to walk past a bank without being encouraged to take out personal loans or to remortgage their home to buy an investment property. Countess thousands of people became landlords overnight, many of them not motivated by greed but by having one eye on retirement.
“I didn't understand stocks and shares but wanted to do something with the value I had built up in my home as property prices soared,” said Kenneth, a Dubliner who declined to be identified. “I bought an apartment as a pension but I have had real trouble renting it in recent years because of the downturn. It is also in negative equity. Now I am faced with paying the costs of two mortgages – the mortgage I took out on the apartment and the new loan on my own home - in a softening rental market and with reduced mortgage interest relief.”

Casting the tax net wider

Unfortunately, Kenneth is far from alone. When it comes to broadening the tax base, property is a relatively easy target. In economic parlance it is a fixed asset, which makes it nigh on impossible for anyone to dodge a bullet.
Residential landlords will see the amount of tax relief allowable against mortgage interest slashed from 100% to 75%. For many investors, this relief was the single biggest reason they decided to put their money into bricks and mortar rather than other investments.
The new measures will apply to new and existing mortgages from May 1. Investors in commercial property are unaffected.

A double whammy

The government has further hit property investors by a reduction in rental supplement on the basis that rents are softening, thus making them more affordable for tenants. This is unlikely to come as any consolation to Kenneth, whose apartment has been lying empty since foreign migrants began to return home in their droves when the work dried up. Even if he dropped the rent, his income would fall and it would be unlikely to cover his costs. Any income from will, of course, be included in the overall assessment for income levy purposes – a levy doubled in Budget 2009.

Planning to head out the back door?

For those who have had enough and are looking for an exit, it won't be easy. Not only is the market overflowing with properties for sale, the chances are that anyone who bought in the past five years can expect to receive less than they paid for their property. Many investment properties are in places than now resemble ghost towns.
Those lucky enough to take a chunk of equity with them can expect to hang on to less of it. An increase in the the capital gains tax rate from 22% to 25% on any profits takes effect from today, April 8th, 2009.

You ain't seen nothing yet

Having hit property investors, it would appear homeowners are now firmly in the minister's sights for Budget 2010.
“The changes signalled by the minister will be fundamental and far reaching with a view to widening the tax base, eliminating or reducing many tax incentives and indeed changing the focus in terms of new sources of taxation,” according to Jackie Masterson, a partner with Russell Brennan Keane, a business advisory firm. “It is very likely that changes will involve the introduction of a property tax; taxation of child benefit; the introduction of a carbon tax and changes to pensions”.