Government may slash VAT on new homes
Tge government will consider reducing the VAT rate on the construction of new homes in an effort to tackle the housing crisis.
It is hoped the move would prompt more activity in the construction sector, simultaneously tackling the issue of under-supply and dramatically reducing the cost of new homes built nationwide.
The country's chartered surveyors have suggested reducing the rate of tax on new houses built, from the current rate of 13.5pc, to just 5pc for the next two years.
The proposal was yesterday published by the Society of Chartered Surveyors in Ireland (SCSI) as part of a '10 step' strategy to addressing the housing supply shortage and will be included in the body's pre-budget submission to the Department of Finance.
Other proposals by the society include:
• reduce development contributions for two years
• a property tax exemption for people 'trading down to smaller' units
• introduce a levy on vacant sites in towns and cities
• build more 'European-style' apartments to make such living more attractive to families
Speaking at the publication of the new strategy, society chairman Simon Stokes said reducing VAT rates for the tourism industry had proved very successful and boosted job creation.
"All developers report, and our members also report, that we need to reduce costs and one of the ways to do that would be to reduce VAT to 5pc for two years.
"This was very successful in the hospitality sector where they introduced VAT to 9pc and reported a job increase of about 15,000," he said.
A spokesperson from the Department of Finance yesterday said reducing the VAT rate on homes would be considered when it receives the proposal from the SCSI.
"If such a suggestion to reduce the VAT rate was part of the pre-budget submission, it would be considered by both minister and department officials as part of the budgetary process," he said.
However the Irish Independent understands the level of reduction to the VAT rate could be restricted by the fact the government has already reduced the 13.5pc VAT rate in the hospitality sector.
It remains unclear if the VAT rate could be reduced to a third rate, meaning if the rate was to drop, the new rate could only be set at 9pc.
The society also called for the construction of larger 'European style' apartments to encourage families to move away from the idea of single standing houses.
"If the right type of apartments are built, people will be happy to live in them. The problem we have is a lot of the apartments built during the boom are not suitable for family living.
"We need bigger apartments and a better mix of apartments," Mr Stokes said.
The SCSI said the latest figures show house prices in Dublin are 24pc higher than a year ago.
They say some 80,000 houses are required over the next five years, but only 8,300 were built in 2013 - down from 2012.