Revenue may lose €3bn as housebuilding forecast cut

UP TO €3 billion could be wiped off government tax revenues next year, as Davy again cuts its forecast for house completions.

The Dublin-based stockbrokers had predicted up to 55,000 houses would be built in Ireland next year, a drop from the 74,000 completions expected this year.

But Robbie Kelleher of Davy Research said it would be cutting its forecast over the coming weeks to the mid-40s and he said in time the figure could be even lower.

As a result the Government looks set to lose another €3bn in tax revenues next year because for every 10,000 less houses constructed about €1bn is taken off tax revenues.

Last year 88,000 houses were built, with 74,000 completions anticipated for the current year.

In September, Davy said it is forecasting the growth in construction employment could slow to about 3% or 3.5% this year and fall to as low as 1% next year if the housing market continues to decline.

Mr Kelleher said the lead indicators for next year are “quite disturbing”.

“The end of next year is still very far away and what happens after the Christmas selling season is crucial.”

He said the stamp duty measures introduced by Brian Cowen in the budget were sensible.

“Ideally I would have liked to see lower rates but it was the right time to do what he did.

“In general terms, the budget will add to, rather than subtract from, economic growth in 2008.”

He said the reform of the stamp duty regime is likely to boost housing market activity.

“For second-hand buyers and buy-to-let investors, the changes amount to an effective price cut of up to 3.3%.”