Budget 2026: VAT Reduction on New Apartments - What It Means for Investors

The Measures

Budget 2026 introduced two significant commercial real estate measures:

• VAT reduction for new apartment sales - lowering the tax burden on newly built apartment stock.
• Corporation tax exemption - aimed at stimulating institutional investment in residential development.

Why This Matters

Dublin has faced a persistent undersupply of apartments, particularly in the city centre and key transport corridors. The VAT reduction directly improves the economics of new apartment development by reducing the end-cost to buyers and improving developer margins.

For investors, this creates several potential effects:

• Increased supply of new apartments could ease rental pressure in specific micro-markets, affecting achievable rents on older competing stock.
• Development opportunities become more viable for investors considering ground-up or refurbishment-to-apartment projects.
• Institutional capital attracted by the corporation tax exemption may increase competition for development land and completed schemes.

Investor Takeaway

The VAT reduction is most relevant to investors involved in - or considering - development, refurbishment, or forward-purchase strategies. For buyers of existing pre-63 or older apartment stock, the indirect effect is that newer, tax-advantaged supply may enter the market and set new price benchmarks.

As always, the discipline is the same: model the specific property, stress-test the assumptions, and don't rely on broad policy tailwinds to make a marginal deal work.