Vol. 492 No. 2
27 Mr. R. Bruton asked the Minister for Finance the measures, if any, he has taken to monitor the effect of the initiatives taken arising from the Bacon report; if the housing market has responded to these initiatives; and if he will make a statement on the matter. [13851/98]
The total Government package announced on 23 April, including the taxation elements contained in the Finance (No. 2) Act, must be assessed by reference to the policy goals set out at that time. The goals which the Government identified are: to increase the supply of serviced land; to reduce excess investor demand; and to assist ordinary house purchasers, thus defusing the house price spiral and increasing the affordability of housing.
At this stage, it is too early to measure the effectiveness of the Government package. However, early indications, based on recent media reports, suggest that recent residential units coming to the market are being purchased almost exclusively by owner-occupiers, whereas in the past a substantial percentage of such units would have been sold to investors. The impact of these measures will be kept under review both by my Department and the Department of the Environment and Local Government.
Does the Minister intend to put in place any systematic monitoring in co-operation with the CSO or others in respect of investor purchases and rent levels? Many people are concerned that the impact of the changes on investors will result in higher rent levels. Is the Minister monitoring those who benefit from lower stamp duties? There is a legitimate fear the benefit will be passed on to the sellers rather than the buyers. What specific statistical data are being collected to ensure this policy is working?
The gathering of such information is primarily a matter for the Department of the Environment and Local Government and the CSO. The issue of lower stamp duties was discussed in depth on Committee Stage of the original Finance Bill and the Deputy may want to read the comments I made at that stage. The Finance (No. 2) Act was introduced on foot of the Bacon report. The Bacon report must be taken in its totality. Bacon suggests that, taken together, all the measures will have an intended distorting effect on the market at this time. In the longer run, house prices will be determined by supply and demand. Bacon recommended and the Government agreed that the incentives to the investor were too great and were forcing owner occupiers out of the market.
The Deputy asked about the effect of the Finance (No. 2) Bill. The only evidence I can offer is the anecdotal evidence published in some newspapers which appears to suggest that the owner occupier now has a better chance of competing. However, in the longer term it is a matter of supply and demand. We tried on this occasion to distort the market to give the owner occupier a better chance of succeeding in that market.
How about increasing the supply?
The Deputy must ask his local authority.
It is inadequate that the Minister must rely on newspaper reports to monitor the success of a policy. He should have agreed a system with the CSO and the Central Bank for monitoring the extent to which the stamp duty benefits go to home buyers, lending policies are conforming with prudence, prices are reducing and rents are stabilising. These are the test issues for the success of the strategy and it is not acceptable that he does not have such a monitoring system in place.
The Central Bank keeps a strict eye on the lending institutions to ensure they are exercising prudence in lending policies. However, the Finance (No. 2) Bill was passed only a few weeks ago and it is highly optimistic to expect a detailed report.
Not a report, a monitoring system.
One thing this country is not short of is institutions and I am sure I will be able to give the Deputy chapter and verse on the effects of these measures in the near future. The Revenue Commissioners will be able to extrapolate information from the data on stamp duties. Information on house prices will have to wait until we see the effect of the legislation.
Is that not spoofing by the Minister? Will he not agree to convene the Central Bank, the Revenue Commissioners and other interests in the market to ensure there are proper reports which are systematically collated for the benefit of the Minister?
The Deputy will be aware of what is happening in the housing market from walking around his constituency. He will not require detailed reports from me or anybody else.
