Government to take radical action over housing crisis

The Cabinet is today expected to approve a series of radical measures for the housing market, including the reduction or abolition of stamp duty on secondhand houses for first-time buyers.

A range of other tax measures are expected, aimed at discouraging investors from buying property. Some of the measures - including the restructuring of stamp duty - are likely to be enacted later this week.

The Government will also consider a range of other proposals designed to increase the supply of serviced land and greatly accelerate the planning process.

Among the sanctions for those who do not release serviced land for building may be the threat of compulsory purchase orders. A range of proposals in a report into the housing market compiled by the economic consultant, Dr Peter Bacon, are expected to be fully implemented by the Government and incorporated in legislation in the coming months.

This is Dr Bacon's third report on housing, with the focus on new measures directed at increasing the supply of affordable housing. The Minister for Finance, Mr McCreevy, said yesterday the proposals would include initiatives to improve the supply of housing and also to influence demand. They will be announced on Thursday.

The Minister insists the legislative changes will have a substantial impact on reducing the spiral in house prices and in helping first-time-buyers to secure a home.

The Government has made changes to the application of stamp duty in the past to alleviate the financial burden on new home-owners.

First-time buyers are exempt from paying stamp duty on new houses, while the rates applied on less expensive second-hand houses have also been reduced in recent years.

At present, stamp duty varies from 3 per cent to 9 per cent on houses valued over £65,000.

The new measures, which will further reduce or abolish this tax for first-time-buyers of secondhand houses, would expand the options available to those searching for a home.

A key issue in addressing the supply of housing has also been to make it less attractive for investors to buy up houses and apartments in the current market. There has been strong speculation that stamp duty could as much as double on third or subsequent properties.

This time the Cabinet is likely to consider whether changes in capital gains tax rates would be effective in easing the soaring cost of housing.

This could include increasing the rate of capital gains tax applied to the sale of investment properties.

The measures come at a time when the Irish Congress of Trade Unions has accused the Minister for Finance of being complacent about inflation.

Mr McCreevy yesterday firmly rejected this criticism, pointing to the new housing measures as one significant step in addressing inflationary pressures. He said all possible initiatives to tackle inflation would be considered.

Official inflation figures for May issued today are not expected to record any further increase, with analysts suggesting the annual rate will not rise from last month's 4.9 per cent and may even fall marginally to about 4.7 per cent.

There is also some evidence that the rate of increase in house prices is beginning to slow.

Trade union leaders are due to meet the Taoiseach later this month to review progress in talks with senior officials aimed at introducing further anti-inflationary measures.

On housing, ICTU is calling for penalties to be imposed on developers who hoard zoned and serviced land, compulsory purchase of land by local authorities at agricultural prices, more resources to speed up the planning process, and for fees for auctioneers and estate agents to be fixed.