Brian O'Shea
Question:215 Mr. O'Shea asked the Minister for Finance the proposals, if any, he has to introduce new taxation measures to assist house buyers; and if he will make a statement on the matter. [6190/99]
Written Answers. - Tax Incentives.
The Finance (No. 2) Act of 1998 introduced a number of tax measures to assist those wishing to purchase houses as owner occupiers. The Act gave effect to tax measures which represented a significant part of the Government's package of measures aimed at addressing problems in the housing market. This is a three pronged approach aimed at increasing the supply of serviced land, reducing excess investor demand and assisting ordinary house purchasers.
The Act introduced three tax measures to achieve these aims. It reduced the rate of capital gains chargeable on development land, for a limited period, in order to encourage the early release of such land for building. It restructured the stamp duty regime, first by reducing the rates applicable on houses at the lower end of the market, and second by imposing stamp duty on new dwellings bought by non-owner occupiers. Most significantly, it removed the deductibility of interest on borrowings for the purchase of rented residential accommodation.
These measures were designed to restore balance to the housing sector – balance between supply and demand, and balance between investors and owner occupiers. It was recognised at their introduction, that those measures aimed at alleviating excess demand would have a more immediate effect while the measures aimed at improving supply would take longer to have an impact. The evidence to date shows that the demand side measures are having the desired effect. The rate of increase in house prices has moderated. All the reports suggest that owner occupiers have replaced investors as purchasers of new homes.
These measures, taken in conjunction with the significant reduction in interest rates in the final quarter of last year, have been of considerable benefit to house buyers. In view of this, and the time frame required for these measures to have their effect, I have no proposals at present to introduce new taxation measures to assist house buyers. However, this area is being kept under review.