The rapid escalation in house prices over the past few years has presented difficulties, even for those prospective buyers who would normally be regarded as having good incomes. Last year the Government appointed a team of consultants to prepare a report on the housing market. The Government reacted speedily to the findings of this report into house prices by Peter Bacon and Associates and announced a number of measures aimed at addressing the sharp increase in house prices and restoring balance to 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 reducing investor demand, promoting liquidity in the second-hand market, through the reforms of the stamp duty code, and implementing a strategy to address the problem which has been credible to the market.
In the Finance Bill, 1999, I acted promptly on a further recommendation contained in the consultants' second report. In response to difficulties identified by the consultants, I amended the conditions attaching to the special low rate of capital gains tax for development land where this is sold to form part of the supply of housing land. In order to avail of the low 20 per cent rate, the land need only be zoned residential under a county development plan.
I have said previously 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 the 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 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 to redress the imbalance between supply and demand in the housing market.