Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The tax framework for real estate investment trust companies was announced in budget 2013 and introduced into law in March last year in the Finance Act 2013. The first REIT launched in July 2013 made its first property purchases in October 2013, so there has not as yet been sufficient time to determine the impact, if any, REITs have had on rental prices in Ireland.

My officials will be monitoring the uptake of REITs in the Irish property market, but it is not expected that REIT ownership of property will reach the level of concentration at which a distortion of competition in the market may occur. REITs are established in approximately 35 countries worldwide and in general the percentage ownership of property by REITs in those jurisdictions tends to be relatively small, often less than 10% of the total stock. The Deputy will be aware from his own experience in the property market that prospective tenants will shop around all potential landlords for the best deal available, so it is expected that rental values in the Irish market should continue to be determined by normal market forces and not by the presence or absence of REIT landlords.

I also wish to highlight to the Deputy that potential benefits for property tenants were a motivating factor in the introduction of the REIT framework last year. REITs are specifically designed for the long-term holding of income-producing property. They are not designed to hold development activities or to be a vehicle for short-term speculative gains, so they can provide greater scope for stable, long-term tenancies. Globally, REITs are characterised by professional management of the property assets they hold, as the objective for the REIT management is to produce stable, long-term income flows for shareholders. It is hoped that the introduction of this type of professional property management into the Irish market will, in the long term, help to standardise and improve management standards across the rental property sector as a whole, which would be of benefit to both investors and tenants.

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