Tuesday 15 October 2019

Hike levies on vacant land to hit hoarders, reduce house prices: ESRI

Kieran McQuinn of the ESRI. Photo: INM
Kieran McQuinn of the ESRI. Photo: INM

Shawn Pogatchnik

The Government should aggressively hike tax on vacant development sites to drive land speculators from the property market, an ESRI research professor has told the Irish Independent.

Kieran McQuinn, speaking ahead of today's publication of the Economic and Social Research Institute quarterly outlook, said the Government's introduction this year of a 3pc levy on qualifying vacant sites was a welcome start - but not nearly strong enough to cut the cost of building homes to acceptable levels, particularly in Dublin.

"We've got to reduce costs. Land costs are one of the chief components," said Prof McQuinn, who said the vacant site levy "needs to be priced more aggressively to get after the speculative component of the market".

Prof McQuinn voiced the speculators' prevailing view on hoarding land: "Why would I go to the hassle of trying to build properties or increase housing supply on the land that I own when I witness the cost and value of that land going up year on year?"

He called land prices "the core of the difficulty in the Irish market" and suggested that the vacant site levy "needs to be a lot more than it presently is" to drive down land prices and force a long-term structural shift in the market.

In addition, he said, anecdotal evidence from property owners' recent court challenges to their first levy bills had highlighted "loopholes" the Government must close.

Prof McQuinn said the Central Bank's rules restricting most mortgage applicants to loans equivalent to 3.5 times their annual income were essential to retain.

This discipline prevents any repeat of a credit-driven property bubble and "anchors" today's house prices to economic fundamentals, he said.

"If you break that link, you get back to the house price credit spiral. That's a policy mistake we don't want to repeat," he said.

Any easing of lending rules would provide no lasting relief, he said, and instead would drive already unaffordable prices higher, risking a second bubble.

While the current vacant site levy of 3pc is set to increase next year to 7pc, many local authorities still are identifying eligible sites and their owners, surveying them and calculating the first bills.

Dublin City Council, for example, currently lists 72 locations on its vacant sites register with a total market value of €236.5m, excluding five sites yet to be valued. The council itself is the biggest land owner with 19 sites.

While the total listed valuations suggest that up to €7m in levies could be due this year, the council in July said it had collected just €627,450.

Irish Independent

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