Dáil Éireann Debate, Wednesday - 12 December 2012
63. Deputy Michael McGrath asked the Minister for Finance if his projections for revenue from the property tax are based on the estimates for the number of properties in each value band as contained in the Thornhill report and specifically that 0.04% of houses are valued at more than €1 million; and if he will make a statement on the matter. [55993/12]
View answerThe projections for revenue from the Local Property Tax (LPT) are based on a blended average of three approaches:
An approach based on the data used in the Thornhill report updated to include regional variation in property prices;
A similar approach based on data from the property price register; and
An approach based on the ESRI tax-benefit model ‘SWITCH’.
The property price register published by the Property Services Regulatory Authority (PRSA) was not available at the time of the Thornhill Group report. The estimation approach in the Thornhill report was used to illustrate indicative yields only, using unpublished Central Statistics Office (CSO) data based on mortgage transactions and the CSO’s property price index. In making the Budget forecast this was updated to include regional variation in house prices and stock using data for county level housing stock, and regional variation in values from the CSO property price index. This results in a higher yield because of the higher weighting of higher value properties in counties with larger volumes of properties.
In Autumn 2012, a national register of property values was published for the first time based on Stamp Duty data from the Revenue Commissioners on actual transactions in the years 2010-2012. The register is updated on an on-going basis. The distribution from the register results in a higher incidence of higher value properties. Using the same indicative rates an analysis based entirely on the register would result in a much higher yield compared with the method above. However, caution has been applied to this approach given the low number of transactions, the high percentage of non-mortgage (i.e. cash transactions) and the possible bias in recent transactions towards transactions of higher quality housing stock which may not represent the generality of housing valuations in the State.
A final method of estimation is based on the ESRI tax-benefit model SWITCH. In the SWITCH model, data on house prices come from the self-assessed value provided by the respondents to the Survey on Income and Living Conditions (SILC) in 2010 with these values indexed to adjust to 2012 prices. The SILC data are based on a sample of all private households, giving it the potential to provide a broader picture than one based on transactions or mortgages. The SWITCH model produces an estimate lower than the first method.
The overall projections for revenue are a blended average of the approaches described above.
As indicated in reply to Parliamentary Question No. 55934/12, answered on 11 December 2012, the Property Price Register shows a higher percentage of houses valued over €1m (c. 1% of the housing stock) than does the Thornhill Report. However, the overall yield estimate does not solely rely on this data source for the reasons given above, in particular because properties which changed hands in the last two years are not necessarily representative of the overall stock of residential properties in the State.
