Stamp duty and housing crisis

 

Sir, – The use of the tax system to steer behaviour in our property market has not been an unqualified success. The appalling vista which greets the visitor to many of our traditional seaside resorts is a compelling illustration of the downside.

Your lead story on Wednesday is that the Government is considering an increase in stamp duty among a suite of measures to deter bulk housing purchases (“Housing crisis: rise in stamp duty considered to deter bulk-buying of homes”, News, May 12th).

If such bulk purchases are truly seen as a problem, we must hope that the planned non-tax measures are persuasive.

A stamp duty increase, even if it can be made to stick, will have little or no impact.

Our politicians will, of course, respond to the loudest complaint, and the bulk buying of residential properties by domestic and international investors is now seen as a proxy for our failure in housing.

In these circumstances the imperative is to be seen to be doing something in the short term rather than taking steps which will produce long-term benefits beyond the current political cycle.

This is a recurring issue in democracies. It takes a visionary like Seán Lemass to introduce policy changes the benefits of which would not be seen in his lifetime but which we enjoy today.

The fundamental issue is that funds invested in bank deposits or in government securities produce a nil or even a negative return.

That drives money elsewhere in the search for yield.

Some major infrastructure investments worldwide are being made at yields of the order of 2 per cent.

Irish residential property offers a gross yield somewhere in the range of 5 per cent to 8 per cent. Applying a stamp duty charge of 7.5 per cent, as has been suggested, will reduce these yields to the range 4.65 per cent to 7.4 per cent.

The result may be that the marginal deal becomes unattractive but that will be the extent of it.

If we agree that we have a problem which must be solved then we should recognise that the solution lies in the housing brief and not in tax.

Impose appropriate conditions in any grant of planning permission.

If this requires constitutional change, bring it on.

And while we’re at it, let’s legislate for the long-overdue implementation of the 1973 Kenny report so that our young people no longer have to take out 30-year mortgages to pay for the windfall gains accruing to property owners from land zoning and the granting of planning permission. – Yours, etc,

PAT O’BRIEN,

Rathmines,

Dublin 6.

Sir, – It is shocking to watch this next phase in the national housing crisis unfold.

A new urgency is palpable as Government takes note that the “people who get up early in the morning” are now locked out of the housing market.

It will require all the talent available to Government to fix the issue. Hopefully it will find some somewhere, someday. – Yours, etc,

EAMON FARRELL,

Sandymount,

Dublin 4.

Sir, – All this rubbish about stamp duty being a deterrent makes one wonder. It must be obvious that developers will simply increase the rents to recoup any increase. House and apartment prices will soar and put them out of reach again.

Why not put a limit on what one can borrow and developers will be forced to keep prices more reasonable? – Yours, etc,

PJ McGARRY,

Blackrock,

Co Dublin.