Written Answers - House Prices.

Thursday, 3 March 2005

Dáil Eireann Debate
Vol. 599 No. 1

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  35.  Mr. Stagg  Information on Emmet Stagg  Zoom on Emmet Stagg   asked the Minister for Finance  Information on Brian Cowen  Zoom on Brian Cowen   the percentage of the cost of a new house taken by the State in terms of taxation or levies; if this can amount to 40% of the purchase price; if has plans to reduce the tax take in view of the serious economic difficulties faced by many couples when trying to buy a home; and if he will make a statement on the matter. [7205/05]

[134]Minister for Finance (Mr. Cowen): Information on Brian Cowen  Zoom on Brian Cowen  Government policy in the housing market has focused, among other things, on improving supply thereby assisting home ownership particularly for first-time buyers. In this context, the years 2002 and 2003 were the eight and ninth successive years of record housing output with 57,695 and 68,819 completions respectively. This positive trend in supply has continued into 2004, with statistics for the nine months to September showing that overall house completions at 54,170 were up 13.4% on the same period for the preceding year. The rate of house building is now more than double that in 1996.

In addition, a range of tax incentives exist to facilitate first-time buyers in purchasing their own homes. The Deputy will be aware that I introduced a stamp duty relieving measure in the 2005 budget for first-time house purchasers who are owner-occupiers of second-hand houses by increasing the stamp duty exemption threshold for such purchasers from €190,500 to €317,500 and by having reduced rates for house values up to €635,000. The lowering of stamp duty rates for first-time buyers was designed to increase the affordability of residential property for such buyers, thus helping them to get a foothold in the property market. It should be noted that all owner-occupiers are generally exempt from stamp duty on new houses where the property is 125 square metres or less, whereas an investor who purchases a new house for renting is liable for stamp duty where the price exceeds €127,000.

Mortgage interest relief is available at source in respect of interest paid on moneys borrowed for the purchase, maintenance, repair or improvement of that taxpayer’s main residence, including second-hand houses. For owner-occupiers, mortgage interest relief at the standard rate is granted in respect of interest paid up to a ceiling on loans used for the purchase or improvement of a person’s sole or main residence. Preferential arrangements exist for first-time buyers over other owner occupiers. The existing higher ceilings for first-time buyers on allowable interest were increased in budget 2003 and currently stand at €4,000 for a single person and €8,000 for married couples and widowed persons. The period for which these increased ceilings apply was extended from five years to seven years.

In relation to the tax take from new homes, the State finds it necessary to raise taxes from this area like all other goods and services. The Deputy may wish to note that I dealt with the issue of the tax take from the price of a new house in a reply to a parliamentary question on 23 November 2004. Figures in excess of 40% have been attributed by the house building industry to the amount that the Government raises in tax from each new home. However, this figure is wrong. In fact, based on the same industry figures, the cost of a new home that accrues directly to the Exchequer through taxation is more like 28%, based on both Dublin and national prices. [135]This is broadly in line with the tax take on the overall economy.

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