Tax to hike house prices by 10,000

THE price of new houses will rise by up to 10,000 next year when a Government tax on building is introduced.

Just as the Government is attributing the recent levelling-off in house prices to the success of its policies, city and county councils are being forced to bring in statutory charges which will double or treble existing development levies to raise 500 million a year for local authorities.

The deadline for the introduction of the charges for residential and commercial building is March 10, 2004. The levies, officially called Development Contribution Schemes, are intended to fund roads, water, drainage, parks and community facilities, but no appeal is allowed if the levy is considered too high.

Describing the charges as another stealth tax, Fine Gael said the revenue raised from the levies will be used by cash-strapped city and county councils to cover wage increases under benchmarking.

The employers group IBEC warned that the levies will hit businesses and increase wage. IBEC director of enterprise Brendan Butler estimated an increase in house prices of up to 10,000.

But a spokesman for Environment Minister Martin Cullen said the level of charges was a local authority matter. "Local authorities have revenue raising powers of their own," the spokesman said. "The minister's officials are aware of each development in local authorities. It's something that's voted upon by the elected members every time."

Fine Gael environment spokesman Bernard Allen said the tax, which comes on top of the rise in household and commercial charges and the abolition of the first-time buyers grant, will raise the cost of a standard new home by 5%, or around 10,000, on average.

"In theory it is up to the developer to pay this charge, but in practice it will be passed on to the house buyer. It is a new stealth tax hitting the individual and businesses," he said.

City and county councils managers are publishing their proposals for the levies While councillors are expected to oppose the imposition of the charges, local authorities are obliged to introduce them under the law. Builders' representatives have admitted the charge will be passed on to house buyers. The Irish Home Builders Association has warned the cost of a new home could rise by between 12,000 and 20,000 if the proposals to treble the development levies are sanctioned by county and city councillors over the coming months.

Yesterday, Minister for Housing Noel Ahern claimed the Permanent TSB House Price Index, showing that house prices nationally rose by just 0.5% during the month of September, vindicated Government policies. "The economic solution to crisis normally is to create supply and we have done that. Our initiatives have been hugely successful 57,600 houses last year and about 62,000 this year. ," he said.

While the Taoiseach has promised Government action on house prices, through a cap on the price of land and punishing developers hoarding building land, nothing has been done on the issue to date.