Sunday 4 December 2016

Building plan solid but must avoid new boom

The mortgage insurance scheme proposal is far less distortionary than stamp duty or property tax, writes Marc Coleman

Published 18/05/2014 | 02:30

Are we headed for another bubble?
Are we headed for another bubble?

In an article on the property and construction sectors on January 14 last I wrote the following: "2014 is the ideal year to design and implement a thorough seven-year plan to get them back to normal."

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Exactly four months later – last Wednesday – the Government came out with a seven-year plan entitled Construction 2020. Its timing (before an election) and content (back to boom/bust?) has been criticised. Certainly the plan isn't perfect. Few are. But a step in the right direction it definitely is. And as for arguments that it could stoke another boom, they are totally wrong.

To see why, think of someone on a crowded escalator in a shopping mall. To get more comfortable they might adjust their posture by taking a single step up or down. But they can't control the speed of the escalator. Likewise governments can change the market with a tax relief or, as proposed now, a mortgage deposit insurance.

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