Aideen Hayden (Labour) | Oireachtas source

I warmly welcome this provision in the Finance Bill, which is a positive development. I have personally championed REITs for many years. This is not a property subsidy, and it is important that Senator Barrett understands that. Effectively, this will be a company structure allowing property to be owned in an effectively collective fashion by shareholders. This would tax the income of the company in the hands of the shareholders and not in the hands of the company itself. In other words, capital gains tax would be paid by the shareholders on the transfer of their shares and income tax is paid by the shareholder in the hands of the shareholder.

This allows a more efficient and transparent process, facilitating better property development and corporate governance. It puts property on an equal footing with other forms of traded commodities through the Stock Exchange. It is a positive development which will open the Irish property market to international investment in a way that has not been done in the past. The signs are positive with regard to the interest of international investors in Ireland on foot of a qualified recovery in our fortunes.

Having mentioned all the positives, I will address a point made by Senator Cullinane relating to the various limits mentioned in the recommendations put down by Sinn Féin that were not accepted. What is being proposed under Irish REITs is similar to the examples in the UK; I would not seek amendments at the moment and would prefer an attitude of waiting to see the results. The only area Sinn Féin did not address with a recommendation was loan-to-value ratios, which in Ireland would be 50% but in the UK is 40%, and I would have argued for a recommendation in that respect. We can adopt an attitude of waiting to see how the process transpires.

I will put a concern to the Minister of State in the same way I put previous concerns to the Minister for Finance, Deputy Noonan. All of the interest so far in REITs comes from the commercial investment sector and relates to retail or industrial property, for example. I would very much like REITs being developed for residential property, particularly with NAMA holdings. I mentioned before that NAMA currently owns 10,000 properties in the residential rental sector, and there would be a perfect opportunity to transfer a large body of residential properties to REITs. That would bring the advantage of much more professionalism into the rental sector, as we have seen a lack of professionalism because of what is termed in Australia the "mom and pop" market. Most Irish rental properties are owned by people with one or two properties, leaving the market subject to rises and falls, with rents going up and down. That is unacceptable as one in five families in the country live in rented properties. We cannot keep taking the rises and falls we have seen with rented properties, and the property portfolio of NAMA presents an ideal opportunity to transfer a significant volume of properties into a REIT structure.

Promoting REITs in the residential sector would require some form of push from the Government. That flies in the face of everything Senator Barrett believes but we cannot let the market rip, whether that rip is on the way up or on the way down. I have noted that when the market is rising out of control or falling out of control, economists say we should let the market find its natural level. I am not in favour of that because too many ordinary people fall victim to the market finding its natural level.

REITs are most welcome but additional measures will be necessary to encourage investment in residential property. As I said to the Minister, Deputy Noonan, I am very concerned that we will see a very significant property shortage in urban areas in the not too distant future. The famous overhang in the Irish market is all very well if we can persuade people to move to Monaghan, Cavan or some other Border counties, but there is no overhang in urban areas such as Dublin, Cork or Galway and it is expiring rapidly in other urban areas. I very much welcome this measure but it should be taken a step further.