Government should consider ‘penalising property investors’

The Government should consider penalising property investors to stop first-time buyers being priced out of the market, Merrion Stockbrokers has said.

In its latest quarterly economic outlook, the brokerage said those who want a house to live in should be given precedence over those who are in it purely for investment purposes, “and looking to make a quick buck”.

Investors are the main driver of cash sales in the Irish property market, which account for more than 50 per cent of transactions.

In its report, Merrion warned there was now a shortage of every type of housing and that the crisis was likely to get worse unless urgent action was taken.

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“Our GDP [gross domestic product] numbers may point to a rich developed country, but you wouldn’t think it judging by the number of people sleeping rough on the streets in our major cities,” Merrion economist Alan McQuaid said.

He also said subsidising purchases through tax breaks, a reference to the Government’s Help to Buy scheme for the first-time buyers, was not the answer.

“Until politicians get their act together, prices will continue to rise,” he said. “We see house price growth staying in positive territory on a year-on-year basis for a while yet, with the annual rate of increase set to remain in the 8-12 per cent range over the rest of 2017,” Mr McQuaid said.

His comments come in the wake of a report by rival broker Goodbody, which cast further doubt on official house-building statistics and a report by property website MyHome.ie, suggesting property price inflation in Dublin is now close to 12 per cent.

In its report, Merrion said Irish GDP was up 5.5 per cent on average on the same period last year, leaving it well placed to top the EU growth league table for the fourth year running.

“We think growth will slow down a touch in the second half of 2017, but are still expecting an overall increase in real GDP this year of 4.5 per cent to 5.5 per cent, as against 5.1 per cent in 2016,” Mr McQuaid said.

Merrion said personal spending growth, a key driver of the economy, was expected to be positive again in 2017, boosted by a further fall in unemployment, but with the increase in headline retail sales likely to be lower than last year.

It said new car sales were likely to be down on 2016, but other areas of expenditure will pick up.

On the labour market, it said it expected the downward trend in unemployment to continue over the next 12 months, though the pace of employment growth was expected to slow.

He said Merrion was forecasting an average jobless rate in 2017 of 6.3 per cent as against 7.9 per cent in 2016 and 9.4 per cent in 2015.

However, he said the improvement masked the recent rise in youth unemployment, which is a cause for concern.