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Housing Tax Changes By Government Should Have No Effect On House Prices (ireland)


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The government was told by top advisers, before last year’s budget, that a sharp fall in house prices was unlikely, although ‘‘a further softening’’ was possible.

The Tax Strategy Group, comprised of senior civil servants, gives a range of advice before the budget. It said all the available evidence towards the end of last year was that a dramatic fall was unlikely, despite some views to the contrary.

Since the start of this year, house prices have fallen by at least 10 per cent, with some commentators suggesting they could fall by as much as 45 per cent from the peak.

‘‘The expectation at the current juncture is that some modest decline in house prices is in prospect for this year with prices stabilising thereafter. However, some commentators are suggesting further or larger declines,” the group said at the time.

The group’s paper on housing reveals that concerns were raised about the importance of the construction sector to the Irish economy. The group noted that house prices were ‘‘on a modest declining trend’’ in 2007.

‘‘A number of factors appear to be weighing on recent house price dynamics,” it said, citing interest rate hikes, increased housing supply and speculation about changes to the stamp duty regime.

The group warned that there would be ‘‘considerable market sensitivity to changes’’ to housing tax, and said that any tax changes by government should have no effect on house prices.

The Tax Strategy Group, whose papers were recently published on the Department of Finance website, looked in detail at environmental taxes, exploring the possibility of excise increases for motor fuels.



Not sure which paper it is

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