Tax puts 40% on new home prices
THE Government tax take from new homes building industry is expected to reach ?9.5bn this year - or more than ?105,500 per house for each of the 90,000 new homes that will be built.
With house price averaging ?297,662 nationally, more than one in every three euro paid by buyers of new homes goes to Finance Minister Brian Cowen.
These figures are based on research by the Irish Home Builders Association (IHBA). The tax take includes PAYE, PRSI, company profits tax, and local authority levies as well as the 13.5% VAT which is charged on each new house and apartment.
It also includes the stamp duties which investors pay for new homes, culminating in a staggering 40% tax take for the Government from each new house sold.
IHBA estimates that almost a quarter of the monies pouring into the Government coffers now come from the housing industry.
Stamp Duty
This estimate does not include monies being generated by the Government from second hand homes and the commercial property sector, which would include capital gains tax and stamp duty.
With home buyers and investors buying as much as ?26.8bn worth of new homes in the Irish market alone this year, IHBA warns the Government that, if it wants to continue to maximise its take from the industry, then it should ensure that it does not interfere in the market "in any way which would impact negatively on supply of new homes which at current levels are broadly meeting demand."
Referring to the outlook for house prices, IHBA Director Hubert Fitzpatrick says that: "The most appropriate method to control house price inflation is by ensuring that laws of supply and demand can operate effectively."
On the supply side, IHBA members are working very effectively to meet demand. This year will be the 14th successive year when housing output has increased and in the first seven months of this year completions were up 24%. The industry is building approximately 21 homes per thousand of population - the highest rate of output in Europe with only Spain at 15,000 homes per thousand coming anywhere close.
Mr Fitzpatrick suggests that this increased supply has also been a key factor in the recent moderating rate of house price increase. Welcoming this trend he says the rate of price increase is expected to ease to single digit figures for 2007.
"What is now needed is an environment to ensure that housing output continues at a high level meeting current demand," he adds.
However demand also remains strong due to continuous increases in population and continued economic growth.
Immigration
The population has increased by 104,100 over the 12 months to April last. Net immigration is the key factor increasing by 30.1% to 69,900 in the 12 months to April last.
The key home buying age group, those in the 25-34 age category, has increased by 22.4% since 2001 and a greater number of people are buying their first homes at a younger age - the average is 29 years of age.
Recalling previous unsuccessful state interventions, such as the Bacon proposals which proved counter-productive, he called on the Government to play its part in ensuring adequate house supply by zoning and servicing of adequate housing lands and the streamlining of the planning process which IHBA considers "the most effective tools to moderate house price inflation".
- Clíodhna O'Donoghue
