Brian Cowen (Laois-Offaly, Fianna Fail)

I am glad to have the opportunity to say a few words on this issue. Senator Terry's amendment gives her an opportunity to discuss the Fine Gael proposals in this area, in particular the suggestion that we increase the threshold for first-time buyers of second-hand houses from €317,500 to €450,000.

There is a duty on all of us, in view of the speculation being caused by reason of the fact we are in an election situation and people are setting out their stalls on the merits of such proposals, to be careful of how such measures impact on the property market. I do not believe anyone in this Chamber has poor intentions in this respect, but the measure has not been thought through sufficiently by the main Opposition party. The reason I make such forceful comment on the proposal is that Fine Gael is, prospectively, the majority partner in any alternative Administration. The impact of what has been suggested must be thought about deeply.

One of the reasons one must calibrate carefully what one does in respect of any intervention in the property market is to ensure it does not have wider implications, whether connected or unconnected with the initiative suggested. We must also recognise that at the current stage of our economic and social development, this is an area of economic activity that retains, in direct terms, more than 270,000 jobs. Some 270,000 families depend on the health or otherwise of the sector. Tens of thousands of others in allied industries that support and supply the sector are also equally dependent on it.

What we must do is develop stable housing market conditions. In the past 12 months we have seen a correction take place where the unsustainable level of house price rises has started to decrease. The continual increase in prices was never a scenario that would be maintained ad infinitum. One of the reasons for the change, mentioned by Senator Terry, is the fact there have been six European Central Bank interest rate rises in the past 12 to 18 months. These have caused an increase of 1.5% in our historically low interest rates. These have had a dampening effect and were introduced to cool a heating property market.

Another reason for the change is that supply is beginning to meet demand. We have begun to build the capacity of the housing construction sector annually to 93,000 units, compared with 53,000 a short time ago. In the past, one of the reasons for rising house prices was that demand exceeded supply. At the same time, people were on better incomes and were in a position to pay more for houses that were scarcer in relative terms. Also, as a result of our historically low interest rates, we had greater competition in the mortgage market and this made mortgage finance more widely available on better terms and conditions than previously. In the past 12 months, supply and demand started to even out, which was important in terms of moving towards a soft landing for the market.

The Fine Gael proposal would cost €460 million. Approximately 50,000 residential transactions take place in the housing market annually and we have more than 1.6 million householders. All the country's housing stock has seen rising equity because of the buoyant market conditions over the past decade and more as a result of the low interest rate climate and the availability of finance, etc.

Let us look at what is involved when talking about tax revenue and how to give more money back to ordinary workers. There has been mention of the 2% drop in the standard tax rate. The reduction from 20% to 18% will benefit more than 2 million people, PAYE workers, and cost €1.1 billion. The Fine Gael initiative would perhaps cost 40% of that, but it would only benefit 5% of the number of people.

There is one simple reason we must be careful when dealing with the property market. The people we should try to help are those who have little or no equity coming into the market. The Fine Gael proposal, however, provides benefits for everybody, whether first-time buyers, people buying for the second or third time or investors. This is because Fine Gael has concentrated on currying favour with the 50,000 involved in residential transactions. Its proposal has been made without any reference to the wider implications for the other 1.6 million. This is a serious problem with regard to the proposal.

Senator Terry quoted the chief executive of the Irish Auctioneers and Valuers Institute. It is not surprising that a person who depends on sellers comes out in favour of an initiative that would benefit sellers. Other Fine Gael Deputies and Senators have quoted the same valuer in their effort to advance this proposal. He is the only valuer I know of who supports it.