The full economic cost of providing infrastructure to holiday homes should be levied on their owners, according to Prof John FitzGerald of the Economic and Social Research Institute (ESRI).

The levy is a "second-best solution" to the problems created by the high level of holiday homes in the Border, Midland and Western region, he argues in a special paper published with the ESRI's Spring economic commentary. The best solution would be a property tax, but this had "proven unacceptable to the public," according to Prof FitzGerald.

The demand for holiday homes in the BMW region, fuelled in part by tax breaks, has pushed up the price of housing in the region he claims.

"The result has been a significant reduction in the competitiveness of the BMW region, adversely affecting the the Government's policy goal of promoting more balanced regional development," he argues.

The trend is likely to continue, he argues, and the long-term economic problems it poses could be eradicated if those buying holiday homes paid the full economic cost in terms of both infrastructure and the "negative externalities (in terms of higher prices for residents)".