Wallace property sold for 50% of its current construction price

Independent TD Mick Wallace told the Dáil that some of his property had been sold to foreign investors for less than 50 per cent of the price of construction today.

The Wexford TD raised the issue as he highlighted concerns about the effects of real estate investment trusts (Reits) on rental prices.

He warned that such trusts could amass major landbanks and distort competition in the property market.

Describing the operation of such trusts as the “stock market version of absentee landlordism”, he said the investors did not have to pay much tax but were buying up large sections of property.

Mr Wallace said there was little financial gain for the State and he questioned the need “to subsidise property tax breaks to such an extent” to encourage foreign investors”.

He said “some of my property has been sold to foreign investors for less than half of what it could be built for today”.

But rejecting the claims, Minister for Finance Michael Noonan said there was a huge overhang of property, including portfolios held by Nama and properties held by banks for impaired loans.

He said the advantages of real estate investment trusts was that a small investor could put in as little as €1,000 and then receive a dividend.

It was something being done across all developed countries “but it will not dominate the markets”.

Mr Wallace said the really big problem with the building bubble was that a small group of people gained control of most of the land in Dublin and landbanked it, owning over 90 per cent. “Prices went crazy. I ended up paying €5 million for one first of an acre because the market was being driven by a small group of people.”

Mr Noonan said Mr Wallace was pointing to possible future fears but he was fully aware there were risks in everything. There were risks in the trusts “but the risk is managed and is minimal as far as I am concerned”.

He said only two trusts had been established so far and with a total investment of €400 million it “is not going to distort any market or give anybody control”.