Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank the Senators for their observations on this section, which deals with REITs. It was made plain in the Budget Statement that this would be in the Finance Bill. This is replicated in approximately 35 other countries that have sustainable investment in rental property. It is something in which we see potential for sustaining the property market after what has been an extraordinary shock.

On the point raised by Senator Hayden, the truth is that we do not have one property market in Ireland, but hundreds of property markets. If one lives in Dublin there is a variety of difference in price between west, south and north Dublin, and that is replicated across the country. Whether we like it or not, our futures are inextricably connected to the market getting back to some kind of sustainable level. Nobody wants to see the type of unsustainable house price and commercial price inflation that developed in this economy over a decade or so. The objective is that if we can establish through REITs and other measures a sustainable basis of investment in rental property, that will be in the long-term interest of a property market that has traditionally not treated people in the rental sector or the rental sector itself as an investment in the way it should have.

The REITs are effectively taking out what is a double taxation agreement. At present, if one is a company one pays from the investor side and one also pays on the corporate side. By equalising the pitch, as it were, one creates opportunities for businesses, both big and small, to invest in property as a long-term investment. That must be in the interest of a sustainable Irish property market into the future.

Senator Cullinane asked very pertinent questions. I realise his recommendations cannot be dealt with, but perhaps I can help in this regard. His party put forward a number of suggestions on Committee Stage in the other House, and the Minister, Deputy Noonan, brought forward two specific amendments to deal with the issues Deputy Doherty raised. One was on the question of dead equity, which was dealt with by the Minister through additional protections. The point made by Senator Cullinane is correct. We must ensure there is protection for people if they go down this route. As a result of the observations his party made on this and the improvements that were made consequently, we are satisfied we have dealt with that in so far as we can.

I am aware of Senator Barrett's views on this. They have been well argued and articulated not just in this House but in many other fora over the years. It is a position of letting the market settle where it settles and we will see what happens. The dilemma in this case is that so much of our economy is predicated on the construction industry, a sector that went from 20% of GDP down to approximately 5% today. I was speaking at a conference earlier this morning about trying to encourage public private partnerships, PPPs. There is extraordinary interest in the Irish PPP market, given the fact that we were not in this space for the last number of years. However, because the risk to the sovereign is diminished, people now see Ireland as an opportunity for public private partnerships. We must get the property industry stabilised and moving in some shape or form, because tax and other revenues for the State are predicated on transactions in that sector.

We see the REITs as a logical development for investment in the rental sector for both large and small companies. I agree with Senator Hayden that it is not an incentive or subsidy. It removes a lacuna that has been in place for a long time and which has really not helped the sustainability of the rental sector in Ireland. Our rental sector is out of kilter with the rental sectors in other western European countries. We appreciate that home ownership in this country is very strong, but we must have a sustainable market for investors who wish to invest in the rental sector. We very much hope that section 41 and the establishment of REITs is a step in that direction.