OECD calls for property tax hike as Murphy comes under fire over 'co-living' gaffe
Property taxes should be hiked and valuations need to happen regularly to keep up with the reality of rising house prices, the Government has been warned.
After a decade of boom-bust and recovery, Ireland's volatile property market continues to throw up major risks, the Organisation for Economic Co-operation and Development (OECD) warned.
Its sharp focus on housing came amid fresh criticism of Housing Minister Eoghan Murphy's handling of the crisis.
Mr Murphy this week said that younger workers should be "excited" about "co-living" and having "less space for less rent".
Amid harsh exchanges in the Dáil, Solidarity TD Mick Barry warned that "Deputy Eoghan Murphy arguably tops them all".
"Again and again, he defends the landlords," he said. "Again and again, he defends the markets. Again and again, he defends the indefensible."
Amid the latest economic risks identified by the OECD is the potential fall-out if the surge in foreign funds gobbling up billions of euro of Irish properties comes undone.
Those investors do not borrow here and are not a risk to the Irish banks - which property investors were in the last crash - but they leave the property market here vulnerable to what the OECD calls "new channels for the transmission of external shocks".
It means that if big funds come under stress in their home markets, they would become forced sellers of Irish assets - potentially flooding the market.
Foreign investors account for more than half of commercial property investment in Ireland, so the risk is concentrated in offices, industrial and retail properties - but the rise of the so-called "cuckoo funds" means billions are now pouring into housing.
Many of those funds are in the US, where the Federal Reserve has been warning that rising commercial property prices may pose a risk to financial stability, alongside rising levels of company indebtedness.
The Government is looking at doing more to tax the big funds that now dominate swathes of the property market, Taoiseach Leo Varadkar said yesterday.
In the meantime, the OECD said his Government should hike property taxes to raise money and cool the market.
Lifting the local property tax in line with house price rises would help "rationalise property purchase demand", it said.
In a mostly upbeat report on Ireland, the Paris-based OECD said the economy here would grow 3.9pc this year and 3.3pc in 2020.
Brexit remains a big risk, but the report said if there was a shock, the Government should look to spend its way through the crisis to offset the impact.
The OECD report also warned that repeated overruns of health spending - €600m in 2018 alone - risked placing State finances in jeopardy.
It said that if they continued, the Government would have less room to offset risks such as Brexit, as well as less money to spend on remedying the large gaps in infrastructure spending that emerged thanks to the deep budget cuts imposed in the financial crisis.