Dáil Éireann díospóireacht -
Tuesday, 11 Apr 2000

Vol. 517 No. 6

Written Answers. - House Prices.

Ulick Burke

Ceist:

203 Mr. U. Burke asked the Minister for Finance the plans, if any, he has to reduce the level of stamp duty on house sales in view of the 28% contribution to revenue in the first quarter of this year; his views on whether stamp duty is a contributing factor to the high cost of housing; and if he will make a statement on the matter. [10697/00]

Minister for Finance (Mr. McCreevy):

The stamp duty yield for the first quarter of 2000 was £197 million. Some £56.7 million of this yield relates to stamp duty on housing.

The stamp duty rates for all residential property were reduced significantly in the Finance (No 2) Act, 1998. This reduction formed part of a package of measures introduced in response to the first Bacon report on housing and were aimed at addressing the rapid increase in house prices in recent years. These measures also included a withdrawal of the stamp duty exemption on new houses for non-owner occupiers which was designed to reduce the number of investors in the market and free up the supply side.

There is no stamp duty on the sale of new residential property where the purchaser is an owner-occupier and the house is not greater than 125 square metres. If a new house is more than 125 square metres, stamp duty is charged only on the site cost or a quarter of the value of the house, whichever is the greater.

In 1999, the Government commissioned Peter Bacon and Associates to review the effectiveness of the measures taken in 1998 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 have played a key role in achieving a slow down in the rate of increase in house prices. In addition to the taxation measures introduced in the Finance (No. 2) Act, 1998, and the Finance Act, 1999, on foot of the recommendations of the two Bacon reports, there are also a number of measures which my colleagues, the Minister for the Environment and Local Government and the Minister 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.

The latest figures received from the Department of the Environment and Local Government for the final quarter of 1999 indicate average annual house price increases of approximately 16% for new houses and 18% for second-hand houses on a national basis – well below the peak rates of increase, 26% and 37%, recorded in mid-1998. Annual rates of increase in Dublin for new and second-hand house prices, around 22%, are also well below the peaks of 37% and 42% reached in 1998. Moreover, indications of price trends in the early part of the year are also positive, with the Irish Permanent house price index and the Department of the Environment and Local Government's provisional monthly prices both showing further slowdowns.

Given the significant stamp duty reductions in 1998 and the moderation of house price increases over the last two years, I have no plans, at present, to reduce further the rates of stamp duty on residential property.