LAST UPDATE | 7 Oct 2025

A CUT TO VAT for property developers who build new apartments has been announced in today’s Budget, as the government seeks to incentivise developers to increase the supply of new housing.

The VAT rate applied to the sale of completed apartments will be reduced from 13.5% to 9%, effective from midnight until 31 December 2030.

Finance Minister Paschal Donohoe said the reduction will address the “viability gap in apartment construction as part of a social policy to develop more and higher density apartments”.

The Minister also announced new plans around corporation tax deduction for certain construction costs around apartment developments, and the conversion of non-residential buildings into apartments, to further help incentivise the building of homes.

This will be available for projects where a commencement notice is submitted from tomorrow onwards to 31 December 2030.

In February, the Taoiseach confirmed that the Government was exploring possible tax breaks for private housing developers in a bid to boost supply. 

However, Donohoe came out strongly against the idea of the Celtic Tiger style tax breaks, saying such measures have previously caused enormous damage to Ireland’s economy.

He noted that broad tax reliefs for developers, such as what is known as Section 23 relief, have proven to be “very, very costly”.

Other housing measures

€200m in additional funding has been committed to Home Building Finance, a public body that provides finance to homebuilders in Ireland. 

Rental profits from homes that fall within the Cost Rental Scheme have been exempted from corporation tax from tomorrow onwards. The scheme is available to people who have a net household income less than €66,000 per annum and offers “affordable long-term, secure rental accommodation”.

The measure has been announced in a bid to accelerate the delivery of affordable homes.

A new derelict property tax will replace the derelict sites levy, which is currently charged at a rate of 7% on the site market value. 

“I do not intend for the new tax to be charged at a lower rate than this,” Donohoe said as he announced the budget’s housing measures. 

Donohoe said he intends to bring forward legislation for the tax next year, and have it implemented in 2027.

The income tax deduction for small landlords who retrofit their properties has been rolled over for another three years.

Landlords can claim the tax deduction for two properties, up to €10,000 per property.

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A deduction for Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) will also apply.

The First Home Scheme will not be extended to second-hand properties. The Taoiseach previously stated that this year is about focusing on new build homes. 

Response

The executive director of the Simon Communities of Ireland, Ben Grogan, said the budget “seems to be focused on landlords and developers, with many measures being announced to encourage housing construction”.

He said it was disappointing that there was no mention of homelessness prevention.

“It is disappointing to hear the Government speak about running multiple surpluses whilst the number of people being forced into homelessness grows month on month,” he said. “Over 5,000 children are living in homelessness and are being robbed of their childhoods.”

The director of research at property advisor Savills Ireland said the VAT cut “gives developers and funders the certainty needed to move projects forward”.

John Ring described the measure as “welcome” and “practical”, saying it would help stimulate apartment construction across Ireland’s cities.