I raise this serious issue because of the major negative impact of the 9% stamp duty and the 2% tax per annum on second properties introduced in the Property Act in June on the recommendation of the third Bacon report.
When the Property Act was introduced Fine Gael spoke against the tax for two reasons: first, it would have very little impact on first time buyers who are finding it next to impossible to purchase a house in large urban areas and, second, it would reduce the incentive for people coming into the private rental market which would leave less property available for renting and, in turn, drive up rental costs as is happening in large urban areas.
This Government has failed to put in place the one measure which would allow first time buyers into the market and reduce rents in the private sector, namely, increasing the supply of housing stock. There is a major housing crisis in cities like Dublin, Cork and Galway but in the region I represent the housing issues are vastly different. The BMW region was established by the EU for Objective One status because of the need for future development and to ensure viable population levels which would require the necessary infrastructure and service developments. We are supposed to be receiving preferential funding from EU and central government to sustain and improve our population levels. Furthermore, the Minister for Finance introduced rural renewal schemes for counties Leitrim and Longford, and parts of Sligo, Roscommon and Cavan, as an incentive for much needed outside investment to be attracted into these counties. I have complimented the Minister for this initiative on numerous occasions.
This scheme has the potential to be very successful but since the introduction of the 9% stamp duty and the 2% annual tax on second properties, the interest expressed by investors has dwindled to a trickle. The logic of the Government's policy in this matter is inexplicable and is further proof that no coherent plan is being advanced by it to sustain growth and development in our region.
Houses for first time buyers are not a problem in the rural renewal scheme area. I contacted three auctioneering firms in Leitrim this afternoon and they informed me that, between them, they have over 100 properties ready to be occupied selling at £80,000 or less. A former Leitrim county engineer whenever asked by councillors to provide houses for bachelors would say, "When you provide the bird we'll provide the house". The men can now provide the women but we cannot provide the houses. The Government has a lot of work to do.
If the Government wishes to help first time buyers it could put in place a policy which would allow them to reclaim all the VAT paid on the purchase of a new house. For example, a house costing £100,000 would result in a refund of £12,500 to the purchaser, a major increase on the paltry grant of £3,000 currently available.
The rural renewal scheme and the BMW areas need property investors. However, since the introduction of the Property Act the purchase of a house for £100,000 has increased from £103,000, including 3% stamp duty, to £115,000. Many potential investors are now looking at property outside the State.
This proposal has been a dismal failure and before further damage is caused to the housing market I am calling on the Minister of State to give a commitment that the Government will rescind the 9% stamp duty and the 2% annual tax in the budget. If it does not do so the current policy will have the opposite effect to that intended.