Ciarán Cuffe (Dún Laoghaire, Green Party)
Link to this: Individually | In context

Question 88: To ask the Minister for Finance his views on the findings of the ten year review of the housing market based on data from ESRI and Permanent TSB house price index which highlights the Government's decision to abolish higher stamp duty rates for investors and to restore interest relief on rental properties as associated factors for the significant increase of, on average, 15 per cent per annum. [24807/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

I have noted the recent analysis of the housing market over the last ten years conducted using data from the ESRI/Permanent TSB house price index. While house prices have risen significantly over this period, the rates of increase must be seen in the proper context. In particular, there has been a large increase in household incomes due to higher employment, increases in earnings per capita and lower rates of income tax. In addition, demographic factors have been important; these include inward migration in recent years as well as the growth in the population in the household formation age cohort. Finally, interest rates have fallen significantly due to our participation in EMU.

While the appreciation in the housing market over the past decade therefore reflects a wide variety of economic factors, experience over the years has demonstrated that caution must be exercised in having recourse to taxation measures designed to influence the market. For example, in the light of recommendations of the first Bacon Report on House Price Developments, mortgage interest relief for investors was abolished for new loans in 1998. Likewise, a more onerous stamp duty regime for property investors was introduced in 2000, with more favourable rates for first-time buyers, in a move away from the traditional tiered set of stamp duty rates that applied uniformly in respect of all second-hand properties. However, after the introduction of these measures, the house-building industry began to experience a downturn and concerns arose as to the negative effect on investment in the private rental sector and on overall housing supply. In this context, it is noteworthy that the commission on the Private Rented Residential Sector which reported in July 2000 on all aspects of the sector made a general recommendation that mortgage interest relief for investors should be restored in the context of promoting a more professional management approach to the business of renting residential accommodation. Consequently, changes were introduced in Budget 2002 to reintroduce mortgage interest relief for investors in residential property, and to bring the stamp duty rates for investors in line with the rates applying for owner-occupiers of second-hand houses generally. These changes were successful in maintaining and increasing housing supply, while safeguarding employment in the construction sector.