SCSI concerned Help-to-Buy scheme not addressing the high costs of construction in Ireland
16 August 2019 Today’s figures from the CSO indicate that the slowdown in property price is continuing with national annual inflation 2.0% in the year to June. Despite the slowdown, prices are still rising, in particular in areas outside of Dublin, where more homes are available. The Society of Chartered Surveyors Ireland (SCSI) believes an adequate supply of serviced development land for residential development should remain a key focus for Government to tackle the high costs associated with delivering houses and apartments to the market. SCSI is calling for a shift away from the Help-to-Buy scheme over the next 12 months.
Johanna Gill, President, SCSI said: “The Help-to-Buy scheme is a demand side initiative that has an inflationary effect in relation to property prices. More must be done to reduce the cost of constructing homes and make it more affordable for the average income earner. The Help-to-Buy does not address the high costs of construction in Ireland. Therefore, the SCSI recommends that transitionary timelines should be introduced to cease the Help-to-Buy scheme over the next 12 months and policymakers should place a greater emphasis on increasing supply of development land.”
Johanna Gill continued to say SCSI has concerns regarding the high delivery cost associated with bringing new homes to the market: “The Annual Residential SCSI Property Report has shown us that residential development land has increased in values on average by 10% annually over the past few years. This is mainly due to supply constraints and therefore the Help-to-Buy scheme is not addressing the high input costs of delivering housing which need to be brought down. An adequate supply of serviced development land for residential development should remain a key focus.”
The SCSI has called for a change to Capital Gains Taxation to stimulate more house building and hence increase supply of the product that is so desperately needed.
“One way this could be achieved would be to implement a considerable reduction in Capital Gains Tax for residential sites which will increase the attractiveness of land owners to sell their land, thus making more available for building.”
To increase supply of residential development land, SCSI proposes reducing development land Capital Gains Tax rate from 33% to 8% for a defined period but aimed at zoned and serviced residential development land. If more land becomes available as a result, then the higher levels of supply should reduce the development land value inflationary rate. As the cost of land is a significant financial component of house building, a reduction in land prices, coupled with the cumulative effect of finance costs on land, will help to reduce the overall cost of delivering houses to the market.
ENDS
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