Tighter loan-to-value ratios for house purchasers and better updating of house valuations for property tax purposes are among the measures cited in a new report on how to dampen house-price cycles.
The International Monetary Fund report on how Ireland, Spain, Denmark and the Netherlands are recovering from their house-price busts also favours the elimination of mortgage interest relief and other tax incentives for taking on property-related debt, while cautioning "macroprudential tightening" should be gradual, calibrated to the pace of recovery and "offset" by other supportive macro policies.
The report notes how the Central Bank has proposed the introduction of loan-to- value ceilings of 80 per cent for primary dwellings and 70 per cent for buy-to-lets, and other measures.
Speaking generally, it said “as macroprudential tightening will be contractionary, it should occur gradually” and be adjusted according to the pace of economic recovery.
It also notes that loan-to-value and debt-to-income ratios could be varied, so that they are more binding in areas, such as urban centres, where housing recovery is strongest.
Ireland has already announced its intention to phase out existing entitlements for mortgage interest relief, which has not been available to new buyers since the end of 2012.
The report suggests that fiscal savings from reducing incentives for debt accumulation should be use for high- multiplier stimulus investments.
Rental market reforms might include measures to facilitate the conversion of vacant units into rental properties, the boosting of the construction of rental units, and that facilitation of mortgage- to-rent conversions for distressed mortgages.
The report notes that, at a meeting in Amsterdam attended by participants from the four countries covered by the report, it was said that it was difficult to offset the contractionary effects of the “accelerated phase out of mortgage interest deductibility”.
It was also noted that the introduction of rental market reforms should take due account of social objectives.
