Proposed plans to give first time buyers a tax break on new homes in the Budget could actually increase house prices.

ThatÂ’s according to Daft.ie which says lowering the cost of building homes would be more helpful.

Reports published this morning show that asking prices have risen by close to 8 percent in the past year - and will continue to rise next year.

Juliette Gash reports;

Responding to the Daft report, IPAV, the Institute of Professional Auctioneers & Valuers, said that one of the most badly needed and effective solutions to address the lack of supply was a reduction in disproportionate building costs.

 “While far from popular in terms of public support nonetheless it needs to be done urgently in the forthcoming budget,” Pat Davitt, IPAV’s Chief Executive said:

 “The Government should initiate an immediate investigation into the full costs of construction. And at the very least VAT should be reduced from 23pc to 9pc. In the UK and Northern Ireland there is no VAT on housing and in Hungary where the Government recently cut the VAT rate from 27pc to 4pc there was an immediate surge in building.  

“Building costs in Ireland increased by 12pc between 2005 and 2008 and they remain at that level despite the fact that house prices are still 33pc lower than at that time,” he said.