The cabinet is expected to decide next week on a new strategy to damp down house prices through cutting stamp duty for first-time buyers and penalising property and land speculation.
The taxation changes will be proposed to Government following the latest report on the housing market by the consultant Mr Peter Bacon, which was delivered to the Minister for the Environment last week. The plan has yet to be finalised.
Mr Bacon's latest report is understood to differ from his two previous reports in that it identifies the activities of speculators and land-owners as a significant contributor to the rise in house prices. The earlier reports pointed to population changes and rising incomes as key factors. However, this latest report is understood to conclude that speculation is now contributing substantially to rising property prices. Mr Bacon's report is understood to recommend specific taxation measures to target speculators. This could involve capital taxation measures to improve incentives for owners of building land to sell it now for building, particularly in the Dublin area.
The Government is likely to add to this a reform of the stampduty regime to lower the burden on first-time buyers. At the moment new houses bought by owner-occupiers are exempt from stamp duty, but second-hand houses are subject to the tax.
The changes will mean that for the second time in two years the Government will introduce an unscheduled Finance Bill to try to dampen down house price increases. In 1998 Mr McCreevy introduced such a Bill to cut stamp duty for all those buying houses to live in, while imposing stamp duty on new houses bought by investors.
Following those changes houses worth up to £60,000 are exempt from stamp duty. Rates then rise from 3 per cent on houses worth between £60,000 and £100,000 to 4 per cent (£100,001-£170,000), 5 per cent (£170,001-£250,000), 7 per cent (£250,001-£500,000) and 9 per cent (over £500,000).
Fine Gael's finance spokesman, Mr Michael Noonan, called last night for immediate publication of the Bacon report so there could be debate before the Government decides on new measures.
"There is still a huge supply-and-demand problem, and if legitimate tax measures need to be taken, we won't be found wanting in supporting them," he said.
Labour's finance spokesman, Mr Derek McDowell, said the Government should consider exempting first-time buyers, rather than houses of a certain value, from stamp duty unless they were buying particularly expensive homes.
In relation to the need for more development land he said: "The only way of levering land into the housing market is through giving local authorities compulsory purchase powers, then ensuring the land is sold on to builders."