The Government has moved to drive investors out of the lower end of the property market through radical taxation measures, despite Opposition claims that these will increase rents and drive up house-price inflation.
Signalling a growing sense of political urgency about rising house prices, the Government yesterday went further than the recommendations of the third Bacon report on housing in its efforts to curb speculative activity.
A package designed to make it easier for first-time buyers to purchase a home, along with new penalties for those buying only as an investment, was accompanied by measures to accelerate the supply of new houses and apartments to meet growing demand.
Strategic Development Zones (SDZs) with a special fast-track planning process will be designated by the Government, although these will not be fully operational for over a year.
The Taoiseach yesterday acknowledged it would take time to deal fully with the house-price problem, saying that "the end of mass unemployment and emigration and a move towards the greatest period of return and immigration in our history" were central to the crisis.
Mr Ahern promised "more radical measures" if this latest package does not prove effective. He held out the prospect of further taxation measures to ensure the early development of zoned serviced land and said extra contractors from the UK, Germany, Denmark and eastern Europe could be brought in to ensure houses are built quickly.
However, the Opposition claimed Government inaction was responsible for the problem. Fine Gael's housing spokesman, Mr Brian Hayes, said the Government had failed to take responsibility for the problem despite being in office for three years. Mr Eamon Gilmore of Labour said that while his party supported the taxation changes, the announcement was "too limited and too late".
Mr Hayes criticised the decision to exempt property bought by first-time buyers worth up to £150,000 from stamp duty and to charge reduced rates on higher-priced houses. He claimed it would simply give buyers more money to push up prices.
The cuts are designed to appeal to those in danger of being priced out of the housing market. Meanwhile a new 9 per cent rate of stamp duty has been applied to residential investment property, while a 2 per cent anti-speculation property tax will apply for at least three years on investment and holiday homes.
The new punitive 9 per cent rate of stamp duty will apply to all houses and apartments bought by investors since yesterday, no matter what they cost. The rate is considerably higher than recommended in the Bacon report, which proposed a sliding scale rising from 3.5 per cent to 9 per cent, depending on the value of the property.
The change was condemned last night by the Irish Property Owners' Association, which represents landlords.
The introduction of SDZs is likely to prove the most significant measure in increasing housing supply. With the Bacon report saying 54,500 new houses are needed each year to 2005, the new zones will have a special planning process that will shorten the time between the lodgment of a planning application and the start of construction.