Tenants may have to pay much higher rents for houses and apartments in the private sector as a result of the measures announced by the Government yesterday, according to some property industry representatives.
Mr Ken MacDonald, managing director of Hooke & MacDonald, Dublin's largest agency specialising in sales and rentals of new homes, said some of the proposed measures were "draconian" and would have a "disastrous" effect on the residential rental market.
He predicted that Dublin rents would double within 18 months, as a result of a slowdown in supply as builders switched from apartment schemes to offices and other commercial projects.
The Irish Home-Builders' Association said it was "a black day for house-builders and employment in the house-building industry".
It warned that the measures could have an impact on future rental levels. "A serious attack has been made on investors in residential accommodation as a result of the Government's decision to disallow interest on borrowings as a deduction against rental income and by imposing stamp duty on the purchase of new residential investment properties," according to the association.
"The investor plays a major role in the overall residential market, representing 25 per cent nationally and up to 40 per cent in Dublin. The investor in these instances is normally a private individual who will be driven out of this market.
"This will have grave consequences for building activity, employment in the industry and future rental levels. The root cause of escalating house prices has not, however, been the investors' involvement in the market, rather it has been Government's unwillingness to recognise that the problem actually stems from an acute shortage of suitably zoned and serviced land."
The Construction Industry Federation described the measures as "unbalanced". "Stamp duty changes, the disallowance of interest on borrowings and the Section 23 restrictions will, cumulatively, drive investment from the new house-building sector. This will hit employment levels, government revenue and will also quickly raise rental levels".
The Irish Auctioneers' and Valuers' Institute said the plan was "a serious and comprehensive effort to tackle the problem of spiralling house prices". The introduction of stamp duty on investors buying new homes and the curtailment of Section 23 reliefs were acceptable, it said.
However, the total abolition of interest relief for future residential investment purchases against rental income would have "a disastrous effect on rental levels within the private rented sector".
The Irish Property Owners' Association said the measures were a "catastrophe" for the private rented sector and said it would seek an immediate meeting with the Taoiseach and housing ministers. "Unless some key measures introduced hastily and without consultation are withdrawn, the private rented sector is heading for a tailspin, rents will soar dramatically and the high level of homelessness will reach crisis proportions," according to a statement.
Ms Marion Finnegan, an economist with the Sherry FitzGerald estate agency, welcomed the plan as a response to the short-term housing problems facing young people. Regarding the abolition of interest relief on future residential investments, she had been reassured by Mr Molloy's assertion that this affected only people who bought property from yesterday and not existing residential properties.