Last year the Government speedily reacted to the findings of the report into house prices by Peter Bacon and Associates, and announced a number of measures aimed at redressing the imbalance between supply and demand in the housing market. As part of these measures I made a number of changes to the tax system and these were contained in the Finance (No. 2) Act, 1998. Earlier this year the Government commissioned Peter Bacon and Associates to review the effectiveness of the measures taken last year and to consider other recent developments in the housing sector.
In their second report, the consultants noted that there is widespread consensus that the Government actions, taken last year, have played a key role in achieving a slow-down in the rate of increase in house prices. They stated that the primary impact towards price stability has been achieved through, (i) reducing investor demand, (ii) promoting liquidity in the secondhand market through the reforms of the stamp duty code and (iii) implementing a strategy to address the problem which has been credible to the market.
In my 1999 Finance Bill, I acted promptly on one further recommendation in the second report to free up the conditions where one can qualify for the special low rate of CGT for development land, where this is sold to form part of the supply of housing land.
I have previously said that the tax measures taken last year and the further amendment to the capital gains tax code contained in this year's Finance Act were only part of an overall balanced package of ongoing measures taken by this Government. There are a number of measures which my colleagues, the Minister for the Environment and Local Government and the Minister of State with responsibility for housing and urban renewal have announced in this regard. These measures, which have been discussed at length both inside and outside this House, are aimed at increasing the supply of housing as well as improving the affordability of house purchasing.
In short, what could be done in the short-term under the tax code has been done and done promptly. Furthermore, tax measures have been put in place to encourage the increased supply of land for housing development.
