In a recent post I considered our tendency in this part of the world to encourage home ownership both as a form of housing policy and as a form of personal investment. The latter aspect looks less of a good bet these days, but we have had problems in the property market before that were soon forgotten as people went prospecting for real estate gold again remarkably quickly.
Escalating property prices look great for those who see the value of their investment rising, but are terrible for everyone else. Getting on the property ladder becomes harder and harder, property values inflate the cost of living, speculation becomes the norm, and at some point the bubble bursts with terrible consequences.
One way in which property values can be contained at least a little is through property taxation. We had that in the form of domestic rates for some time before these were abolished. In the UK they were eventually replaced with the Council Tax, while in Ireland we have no property tax; this not only creates market distortions, but also deprives local authorities of the means to fund their services properly and competitively.
Now the Economic and Social Research Institute (ESRI) has produced a report recommending the introduction of a property tax amounting to 0.4 per cent of the value of the property. As a measure to reinvigorate local government, produce appropriate funding streams and contain the tendency of the property market to over-heat it makes a whole lot of sense, and the recommendation should be implemented.