From today (7 October 2025) until 31 December 2030:
- VAT on apartment sales drops from 13.5% to 9%.
- A Corporation tax exemption will also be introduced for rental profits from Cost Rental Scheme homes.
Enhanced corporation tax deductions will also be introduced for:
- Construction of new apartments.
- Conversion of non-residential buildings into apartments.
These apply to projects with a commencement notice between Oct 8, 2025, and Dec 31, 2030
Finance Minister Paschal Donohoe described this as a “social policy tool” and not just an economic one. In his words, Ireland has a viability crisis in apartment construction (i.e a difference between the cost of the apartment and what people are actually willing to pay for it).
- High labour costs, materials, and financing have made it nearly impossible to build affordable and/or profitable apartments.
- Developers argue that apartments are €50,000–€80,000 more expensive per unit than similar houses.
The VAT cut aims to reduce that gap and make apartment building worth the trouble for developers. This is especially important for Dublin, Cork, and Galway where density is high and costs are highest.
What Does this Mean for Urban Development 2026-2030?
1. Developers May Have a Strong Incentive to Restart Stalled Projects
- Many apartment projects (especially in Dublin and Cork) have been paused due to cost issues.
- A 4.5% VAT cut could lead to savings of up to €10,000–€25,000 per apartment unit – depending on sale price.
- When you combine that with the new corporate tax deductions I mentioned above, projects that were unattractive to developers suddenly become attractive.
MY MAIN CONCERN.
This won’t immediately translate into more supply in 2026, as construction logistics do take time. We can expect visible results around late 2026 or 2027.
2. Buyers May Enjoy Stable House Prices, with Little Immediate Benefit
- Just because apartments may cost less to build does not mean that they will cost less to buy. Developers may choose to keep the 4.5% VAT savings as profit, instead of passing the savings on to the buyer. I can see this happening for projects that are already underway.
- Over time, increased supply could soften prices for apartments, especially in urban areas.
- The policy runs until 2030, giving a five-year runway for planning and investment.
MY MAIN CONCERN
If the VAT reduction is absorbed by developers as profit rather than passed on, buyers will see no difference in anything. I’m not sure government will implement mechanisms that would force developers to share the benefit.
3. Potentially Slower Rent Inflation for Cost Rentals
The corporation tax exemption for Cost Rental housing could expand affordable rental schemes, especially for middle-income earners.
- More developers might participate, because they know they can keep more of their rental income post-tax.
- The knock-on effect may be that rents could increase a lot slower in the Cost Rental sector.
4. Refurbishment and Reuse Of Vacant Buildings
I believe that the tax deduction for conversions of non-residential buildings into apartments is one of the most impactful measures. Here’s why:
- It encourages reusing derelict or commercial properties.
- Could speed up urban regeneration and bring life back to city centres.
- Ideal for modular or hybrid developers who specialise in adaptive reuse.
If properly implemented, this could turn vacant office blocks into apartments, particularly post-pandemic.
5. Long-Term Social Gain (Potentially)
Reducing VAT means less tax revenue for the government. This could add up to hundreds of millions in foregone income over five years. But if the measure leads to more completions, the State will benefit through:
- More construction employment.
- Reduced pressure on social housing lists.
- Higher overall housing output.
In Summary
| Group | Likely Outcome |
|---|---|
| Developers | Encouraged to start building again, but may pocket savings |
| Buyers | Possible price stability, but no clear sign prices may actually drop if at all |
| Renters | Potential rent stability through more Cost Rental homes |
| Delayed impact | Planning, financing, and build timelines mean benefits will take 18–24 months to appear. |
| Government | Gains policy momentum, but loses tax revenue during a period of high spending demands (health, housing, education etc). |
