Property prices have risen by nearly 25% since the last property revaluation for tax purposes in 2021. This has prompted the government to consider changes to local property tax (LPT) bands and rates to prevent significant increases in tax bills for most homeowners.

The proposed adjustments involve widening tax bands and decreasing the LPT rate, as Minister for Finance Paschal Donohoe is set to announce. With property values on the rise, the government aims to alter the tax calculation method before the next revaluation date on November 1st.

For properties falling within the lower bands, which encompass the majority of homes valued under €525,000, annual tax bills will see a modest increase ranging from €5 to €23. Specifically, those with properties valued under €240,000 will pay €95 per year, an increase of €5. On the other hand, properties valued between €420,000 and €525,000 will see a €23 increase, bringing the total annual tax to €428.

However, homeowners in higher bands will experience more significant hikes in their tax bills. For instance, properties valued between €1.995-€2.1 million will see an annual increase of €389, bringing the total to €3,110. Properties valued above €2.1 million will pay tax based on the property's valuation rather than falling within a specific band.

Projections by the Department of Finance indicate a tax increase of 5-6% for properties valued under €1.26 million. Local authorities will still have the option to reduce LPT by 15% and will be allowed to increase the tax by 25% in their area by 2027.

The Cabinet is also expected to approve changes to rent caps, extending Rent Pressure Zones (RPZs) nationwide. Rent increases will be tied to inflation and capped at 2%, with additional protections for renters. However, concerns have been raised that these changes may lead to higher rents and increased homelessness.

In terms of construction activity, AIB's latest construction purchasing managers' index (PMI) reported a contraction in home building during May for the first time in nine months. This decline is attributed to softening market conditions and uncertainty, although the drop in home building was described as marginal.

On a more positive note, the Irish Fiscal Advisory Council (Ifac) forecasts a potential €5 billion surge in corporation tax receipts due to changes in tax rates for companies and increased exports to the US. Big companies are expected to start paying taxes under the new 15% corporate tax rate by mid-next year, with higher profits leading to increased tax payments.

Overall, adjustments to local property tax and other tax-related changes are being implemented to address the impact of rising property values and ensure a fair tax system for homeowners and businesses.