Officials from the Department of Finance have conveyed to Minister Jack Chambers the essential need for Ireland to continue luring private capital, in addition to unprecedented public investment, to feasibly boost the production of new residential properties. On Minister Chambers’ recent appointment, a briefing document was generated highlighting probable adjustments to Government’s new home goals in the upcoming fall season, due to an expanding population under a freshly devised planning framework.
It’s projected by the Department of Finance that an annual fund of €13.6 billion is mandatory to fulfil the target of 33,000 homes set forth in the government’s “Housing for All” scheme. Suppose an annual construction of 50,000 units is considered, nearly €20 billion investment capital would be necessitated each year.
Housing for All is supported by the country’s most extensive housing budget in its history this year, with more than €5 billion being directed to housing via the Exchequer, the Land Development Agency, and Housing Finance Agency lending. To enhance the production of new properties, investment from a wide array of sources, including the state, banking and non-banking sectors is critical.
According to briefing documents, institutional real estate businesses are primarily focusing on constructing rental apartments. The forward funding approach utilised by numerous developers indicates that without this investment, these new homes won’t be constructed.
The Department of Finance points out that future housing production indicators continue to show positive trends, with over 30,000 units set to be constructed between January and April 2024, according to the housing commencement figures. Yet, officials cautioned the Minister about the potential bias in these figures due to the expected conclusion of the development levies waiver and water charge rebate, which were supposed to terminate in late April but have been extended.
The Department also questions the benefit of diminishing VAT to bring down housing prices, arguing that there’s minimal expectation or necessity for such VAT reduction to be conveyed to consumers. It further noted that reverting to a 13.5% VAT rate might result in price hikes passed onto consumers as companies try to uphold their benefits from the temporary reduction.
The Ministry of Finance has cautioned the Minister about the potential larger than expected effect on the Exchequer’s income, due to the proposed global corporate tax alterations. The Ministry of Finance made an initial calculation of the aggregate net cost of enforcing the entire OECD pact in 2020, accounting for both the tax revenue drop from Pillar One and the anticipated augmentation from Pillar Two. It was presumed that annual corporate tax earnings would reduce by €2 billion, equating to roughly 20% of the corporate tax income at that point. Corporate tax revenues have subsequently seen a marked rise, thus, it’s probable that the cost compounds for the pact’s enforcement have also significantly amplified.