Yesterday's Government press conference on the housing crisis was a little like any of the press conferences on the peace process. It was a package, we were told repeatedly, it had to be all or nothing.
The Government's package of proposals to calm the housing market is a shrewd gamble. It aims to increase the supply of homes, particularly for the hard-pressed first-time buyers, and at the same time ease demand by removing the new-style investors from the market.
Government sources admit it is something of a gamble. They cannot be sure if it will work or what unforeseen knock-on consequences there may be.
These may include diverting the wall of investment money that has hit the property market into other areas. The stock market, the London apartment sector and the commercial property markets here and in the UK will inevitably attract more Irish money in the future.
The initial reaction of property consultants is that the removal of interest relief from residential investments will curb the enthusiasm of a whole new generation of investors. The fact that they can no longer offset interest against rent will change the economics of the market. The new measure will inevitably slow down the demand for apartments and some new houses. It will also restrict the growth of the Dublin rental market and discourage developers from retaining ownership of entire apartment schemes as long-term investments.
In the longer term, it could well mean that developers will use apartment sites in marginal areas for office and other commercial schemes. Up to now, the sale of apartments in fringe or rundown areas has been largely dependent on Section 23 investors.
Paradoxically, one of the immediate effects of the taxation changes will be to bump up the selling price of apartments in tax-designated areas. Over the last six months, many developers have been making a killing on Section 23 apartments because of the shortage of supply, by charging premium prices. That situation will be exacerbated in the short term as designated areas are reduced in size. Yesterday's changes will come as a relief to existing investors. There are no new taxes and the existing mortgage interest reliefs are still safe. In relation to first-time buyers, newspaper reports that they were to be exempted from stamp duty on second-hand homes proved to be wide of the mark. Instead, the Government has chosen to reduce stamp duty for all second-hand homes costing under £500,000.
The intention is to relieve what has become a logjam since the previous government increased stamp duty to 9 per cent on homes over £170,000. That change - which replaced Residential Property Tax - was also intended to calm the market, but it had the opposite effect. Once again, the Government is promoting the principle of greater mobility, but it remains to be seen if this will actually be the result. The underlying intention is to bring more first-time buyers into the second-hand market. That, allied with the removal of many investors, should help to free up the new homes sector for young couples.
The Government is also introducing a carrot-and-stick policy to make more development land available. The reduction in Capital Gains Tax from 40 to 20 per cent should encourage landowners to sell serviced land for housing. They face a nasty penalty if they don't; CGT will be increased to 60 per cent in four years' time.
A direction from the Minister for the Environment, Mr Dempsey, to encourage higher densities in some areas, particularly in cities, will facilitate a higher supply of new houses and apartments.
Mr Dempsey has announced a number of innovative measures, including a firm warning to housebuilders that they cannot continue to release houses on a phased basis. One of the abuses of the new homes market is the practice by which builders release a small number of homes and then arbitrarily increase prices for each home subsequently released.
Government intervention in the housing market can be dangerous and have unforeseen effects there and elsewhere. For example, the huge success of Section 23 - which has contributed to the present problems - was beyond everybody's expectations. The net effect could be to cool down a market that was overheating and heading for serious trouble, but the question is still whether the changes will work.