A study by economists at the Central Bank has found that property taxes can reduce the volatility of house prices.

Today's research also found that property taxes provide a source of revenue which remains stable, regardless of the overall performance of the economy.

The Economic Letter, published today, includes analysis which shows that property prices in Ireland swung by 19.9% compared to an average 12.1% in a sample of 16 European economies over the years from 1995-2020.

The paper suggests that the higher recurrent property taxes are, the less the relative benefit of ownership can appear to prospective buyers compared to renting.

This, it argues, helps moderate the demand for property ownership with the consequent knock-on effect on prices.

It also points out that the amount collected in property tax in Ireland is "relatively low compared with other European countries".

It says that despite property prices doubling since the Local Property Tax (LPT) was introduced in 2013, the income from LPT has been "relatively constant".

The paper also includes an analysis of how different taxes like VAT and income tax respond to changes in the overall performance of the economy.

It finds most taxes rise or fall according to the economic cycle but the yield from property tax does not fluctuate.

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