Cutting taxes and levies on newly-built homes will help ease the housing crisis that has developed in Dublin and other urban centres, according to the head of the Republic’s only listed construction company.
Figures published this week show that a shortage of homes in the Dublin market drove a 25 per cent increase in the capital’s house prices over 12 months and there were signs of similar pressure in other areas.
Speaking after the company's annual general meeting, Charles Gallagher, executive chairman of quoted house builder Abbey plc, described the current 13.5 per cent VAT rate on houses as a big hurdle for development.
"If you can reduce the cost of a house, you are likely to bring recovery faster," he argued. "In the UK they are zero-rated, in the Czech Republic (where Abbey also has business) they are 15 per cent.
“High VAT rates reduce the amount of new development. High contribution rates to local authorities is another barrier to the production of housing at lower prices.”
Abbey recently sold out a housing development in Shankill, Co Dublin, and has bought new sites in Foxrock and Cornelscourt on the south side of the capital. It is also building in Lucan.
Mr Gallagher's comments echoed calls from the Construction Industry Federation earlier this week for a temporary cut in the VAT rate to nine per cent to help kick-start building and boost the supply of new homes on the market.
He also pointed out that prices will have to rise in some regions in order to make it viable for companies to start building again. Mr Gallagher noted that in Laois, where Abbey has a site and planning, prices are around €100,000 to €120,000.
“There’ll be no development at those prices,” he said, “€160,000, maybe even €180,000 is a trigger for some development, some people would say more than that.”
The building company boss stressed that increased mortgage lending is key to a broader recovery. “When the shortage is acute enough and there is enough mortgage availability and people have the confidence to borrow, at that point then you will see a more general recovery,” he said.
Abbey has operations in Ireland, southern England and the Czech Republic. In a statement issued ahead of yesterday's meeting in Dublin, Mr Gallagher said: "Trading in the early months of the year has been good. Activity across our business is ahead of last year".
He added that the group is on track for a good year.
