The latest survey by the Institute of Professional Auctioneers and Valuers (IPAV) appears to confirm that a greatly overheated housing market has, at last, begun to cool. Property prices since last January may have increased by some 20 per cent in Dublin, and by 10 per cent in the rest of the State, but the rate of increase has slowed dramatically. There are also encouraging signs that the scramble for investment properties has eased, with the number of inquiries falling by up to 50 per cent in some sections of the market. While demand remains high, most properties are taking longer to sell, while the price of some apartments in Dublin is actually falling - if only marginally.
All of this gives good grounds for optimism that the Government's decision to adopt the Bacon Report last April is having the desired effect. More than any other single factor, the housing boom of recent years was fuelled by what can only be called a speculative feeding frenzy among investors. At one stage earlier this year at least 30 per cent of all new homes in some Dublin housing estates were being bought by investors who had the financial muscle to squeeze first-time buyers out of the market - and to pay premium prices.
The Bacon Report has helped to transform the situation by reducing stamp duty for first-time buyers and by cutting into the range of tax allowances and incentives available to investors. Critically, the Government's decision to abolish tax relief on money borrowed to purchase houses and apartments for the rental market has helped to dampen speculative activity.
This is not to suggest that the problems in the housing market have been removed. Demand for private housing will continue to outstrip supply for a variety of demographic and economic reasons. The scarcity of zoned residential land, especially in Dublin, will continue to trigger high prices. And, after several years of house-price inflation, many new homes remain beyond the reach of first-time buyers.
There are other grounds for concern: the expected cut of about 2 per cent in Irish interest rates - as they converge with those of Germany in the run-up to EMU - could yet unleash another wave of inflation in the housing market. There are also increasing signs that the cost of rented accommodation is surging ahead as many potential landlords drop out of the market because of the Bacon tax changes. Universities and other third-level institutions appear to be bracing themselves for an accommodation crisis when the academic year begins. No government can expect to provide a panacea for all of these problems. Dealing with the housing market is a multi-faceted task for policymakers in which the strength of market forces often runs counter to the social and political imperative to provide good, affordable accommodation.
For all that, the Government must be encouraged by the success of the Bacon measures which appear to justify the argument for a more interventionist approach by the State in other sectors of the property market. One thing is clear: that market cannot be left wholly to its own devices.