By Andrew Bushe
DUBLIN – After a consultant’s warning that soaring property prices in Ireland could develop into a “speculative bubble”, the Irish government has announced a package of measures in an effort to dampen down the roaring housing market.
Under intense pressure to take the heat out of the market, the
government is drastically cutting stamp duty to help hard-pressed first-time buyers of second-hand houses. The government will also slash back special tax deals that have sucked huge numbers of speculators into the market hoping to make a killing.
Housing Minister Bobby Molloy said the government had adopted a three-pronged strategy to deal with the problem and inject mobility into the market.
“It has been clearly identified that investors are overheating
Sign up to The Irish Echo Newsletter
the market, Molloy said. “The ordinary couple who get married and want to own their own home go to the auctions and they haven’t a snowball’s chance in hell of getting a house because the big boys are in there with big money and they are pushing up the prices to take advantage of the tax concessions.”
The government’s package also contains provisions costing _85 million aimed at providing 44,500 additional housing sites.
House prices have been rising steadily for the past three years
and last year alone second hand homes in some areas of Dublin soared by up to 40 percent.
The upward trend has continued to far this year with auctioneers’
guide prices often bearing little relationship to the final prices that homes and apartments have been fetching.
The Peter Bacon report, an economic consultants study for the
government, warns of the risk of a “perverse cycle” emerging with the increasing prices attracting more speculative investment demand.
His report concludes that: “such a tendency, if left unchecked,
could develop into a speculative bubble.”
An analysis of people buying new homes in Dublin last year
reveals that more than 50 percent of borrowers were already home owners. In 1994, the figure was only 31 percent.
First-time homeowners are spending 35 percent of salaries on
mortgages, up from 27 percent last year as they battle to secure a home in a situation where in excess of 30 percent of new homes are being snapped up by investors.
A combination of factors were blamed by the Bacon report for
driving the price boom.
The burgeoning Celtic Tiger economy has provided higher salaries,
emigrants are returning because of the new jobs availability, an
increasing number of people in the housing-buying age group, interest rates are historically low and set to fall further with EMU entry and tax deals are fuelling property as a quick buck turnover for people with spare cash.
The new measures include: