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

I am aware of the price changes that have taken place in the residential property and private rental markets. Nationally, residential property prices rose by 16% in the 12 months to October 2014 according to the Central Statistics Office. The most recent daft.ienational rental index indicates that rents nationally were 10.8% higher on average in the third quarter of 2014 than a year previously.

The Government's view is that the impetus for recent price and rent developments comes from a shortage of supply, particularly in Dublin and, to some extent, in the other major cities. As part of economic recovery, there is an increased level of housing demand, particularly as a result of the growth in the number of people at work. However, thus far, supply has not responded adequately to match demand, leading to increased prices and rents. The Deputy will be aware that Construction 2020: A Strategy for A Renewed Construction Sector sets out the Government's strategy to address these issues and remove blockages from the system in order to get the market moving and increase supply. Some 75 time-bound actions are included in the strategy. My Department is party to a range of actions which, among other issues, focus on appropriate and sustainable development financing, transparent and sustainable mortgage lending, the application of the tax code to the construction and property sectors and addressing legacy issues associated with the property bubble.

I have introduced a number of targeted initiatives in various budgets since 2011 to aid in revitalising the property and construction sectors and help to increase the supply of suitable residential housing stock in certain urban areas where supply limitations are most pronounced. The Finance Act 2013 introduced the real estate investment trust, REIT, tax regime. The acquisition of properties by REITs is part of a broader effort to have a more sustainable, professionalised, long-term property rental market for the benefit of both investors and tenants. More recently, as part of budget 2014, I introduced a number of measures, including subject to state aid approval, the extension of the living city initiative to include Cork, Galway, Kilkenny and Dublin and the broadening of eligibility criteria to include all buildings built prior to 1915.

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In the budget I extended the home renovation incentive to rental properties whose owners were liable to income tax. In the coming months I will launch a public consultation process to examine if owners of zoned and serviced land are hoarding land and delaying development. I have also signalled that the capital gains tax exemption introduced at the bottom of the market will be discontinued from January.

Access to development finance is a key issue that needs to be addressed to ensure the proper functioning of the property market. It is clear from work undertaken by my Department that the funding model for development is fundamentally changed from the previous mainly debt-based model, with more equity now needed.  In this context, the Ireland Strategic Investment Fund, ISIF, under the auspices of the NTMA, is exploring ways, through its commercial mandate, to support financing projects that will enhance the supply of housing. In addition, NAMA has stated it expects to fund the delivery of 4,500 houses and apartments to serve the greater Dublin area in the period from 2014 to the end of 2016.

There are encouraging signals to indicate that policies introduced by the Government are having an effect. In particular, there has been a large increase in housing commencements in the first half of 2014, while applications for planning permission have exceeded 2013 figures each month and are up by almost 20%. Increases in housing supply should lead to a moderation of price and rent rises in the property market, in turn improving access to affordable accommodation. In addition to the measures I have outlined, my colleague, the Minister for Environment, Community and Local Government, has recently published the Social Housing Strategy 2020: Support, Supply and Reform which sets out to address issues of social housing provision, as well as accessibility and affordability. The strategy proposes to provide 35,000 social housing units in the next six years through a combination of construction and acquisition and to meet the housing needs of up to 75,000 households.

On the Deputy's question around the increasing concentration of property ownership, historically the private rented sector has been characterised by small-scale landlords. Attracting large-scale investment in professionally managed residential property, for example, using REITs and other options for long-term investment, can have an important role to play in helping to deliver the professional high standard sector tenants deserve. As part of Construction 2020, the Department of the Environment, Community and Local Government, with the housing agency, is developing a national policy towards professionalising the private rental sector, to include issues such as investment, standards and regulation.  A key element of their research is to assess the policy treatment of the sector, with a view to making recommendations to encourage more and larger scale investment in order to increase the supply of good quality, secure and affordable rented accommodation.

In summary, my Department continues to monitor developments in both the purchase and rental property markets. In line with the Construction 2020 strategy, the Government will continue to work on addressing remaining challenges in the property and construction sectors.

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