The Minister of State for the Environment, Mr Robert Molloy, has warned home builders to put their own house in order or face Government-led initiatives in a bid to protect the buyer.
House price inflation represents not only a threat to the well-being of the sector but also to continued economic growth, the Minister of State told the Irish Home Builders' Association's (IHBA) annual convention in Galway yesterday.
The house building industry has "the opportunity for self-regulation", he said, but "if that is not seen to work in the interests of the customers, then other options have to be considered". Recent publicised cases of "gazumping" reflected "undesirable market practices", and he had written formally to the IHBA to seek improvements in this area in relation to a voluntary code of practice.
Carefully avoiding direct confrontation with angry IHBA members, who have been trenchant in their criticism of the recent measures announced by the Government, the Minister of State said the study of house prices by Peter Bacon and Associates clearly illustrated that positive economic and demographic factors had driven up house prices. This had been reinforced by trends such as investment demand for residential property, infrastructural constraints and the effect of stamp duty rates.
The consultants' report had confirmed that excessive investor demand was a significant factor in the overheating, he said. "If any investment does not proceed as a result of removal of tax relief, it's a fair bet that the viability of the project in the first instance was founded largely on the artificial basis of tax-break subsidisation."
Reacting to the Minister of State's speech, Mr Michael Goggins, director of the IHBA, said his members accepted some of the measures in the Government action programme, but resented the major move against investors.
Investors would not necessarily be replaced by the first-time buyer, and this could impact adversely on the rental market, he said. "It is our firm belief that these and other measures taken by the Government will have serious negative effects on the housing market as a whole," Mr Goggins said.
