Taxes needed even as house prices fall, say Jim Power
HOUSE prices will continue to fall but new property taxes such as water charges and other rates are needed, Friends First said in its quarterly report on the Irish economy.
"All property indicators are very weak and have not stabilised," economist Jim Power said. Housebuilding activity remains "very, very dead", he added.
The collapse in house prices and falling demand for new housing has seen property prices fall 49pc in the capital in the past four years.
This is crimping gross domestic product (GDP), the economist added. Construction usually accounts for 12pc of GDP in Europe but it accounts for less than half that in Ireland, he added.
Mr Power welcomed the Government's decision to introduce new property taxes, and said it was a "step in the right direction". Ireland's failure to introduce a tax many years ago made the country an anomaly, he added.
"We need to create a broader tax base," he added. Water charges and rates for domestic houses should be used to pay for council services along with commercial rates, he said. "If we expect and require decent public services, we need to pay for them."
Many of the country's county councils should be merged to save money, along the lines of the recent merger of Limerick's city and county councils as well as Tipperary's two councils.
Turning to the the rest of the world, the economist said the European Central Bank was wrong to continue raising rates but predicted at least one quarter point rise by the end of the year, despite the slowdown in the German economy.
"I find it very strange and hard to understand that the ECB is tightening rates," he said.
While welcoming the recent agreement to bail out Greece a second time, he said that the authorities will have to revisit the problem again within a year or two.
Mr Power's comments come days before a series of new economic data is due to be released next week.
The purchasing manager's index, the Exchequer deficit, new unemployment figures and retail sales are all due to be revealed next week, giving an up-to-date indication of how the economy is performing as economic growth continues to slow in our main trading partners.