A second 1998 Finance Bill will be introduced later this year to enact new taxation measures aimed at the housing market, which will be a central part of a Government package to be announced later this week.

Significant changes to stamp duty are understood to be a central part of the package and this may involve the abolition of stamp duty on second-hand houses for first-time buyers.

The package of measures - which will be announced tomorrow - is to be specifically targeted at helping first-time buyers, the Minister for Finance, Mr McCreevy, indicated yesterday.

Stamp duty is a major imposition on those purchasing second-hand houses, and a move to abolish it for first-time buyers would be designed to ease their passage into the housing market and bring more houses into their price range. At the moment, the stamp duty charge on the purchase of a second-hand house is calculated at between 6 per cent and 9 per cent of the purchase price. For example, duty of £10,500 would be payable on a house purchase of £150,000. The Government will also introduce other measures in a major package of "carrot and stick" measures aimed at the property market. The introduction of new taxation measures will involve a second Finance Bill, which will be completed in the weeks ahead by the Department of Finance. However, some of the new tax changes are likely to become effective immediately.

Unless the problem of soaring house prices was tackled, Mr McCreevy warned yesterday, there was serious danger of house price inflation spilling over into wage inflation.

The Minister, speaking to journalists at a meeting of EU finance ministers, said the package, which would be announced by the Minister for the Environment, Mr Dempsey, "should help to take the steam out of the housing market".

They would include a range of measures suggested by the economic consultant, Mr Peter Bacon, whose report the Cabinet discussed on Monday. Some of the measures would be "quite dramatic" while others "would not come as a surprise to those following the issue".

There was no one solution to the problem, he said, but he was confident the Government's measures would have an effect. "I think people will regard them as significant," Mr McCreevy said.

The Government is understood to have considered the full range of tax reliefs and incentives aimed at the property market.

Among the key incentives is the section 23 relief, which provides a tax break for those undertaking property investments in designated areas. While this relief is not likely to be abolished, it may be amended by the Government.

New measures to increase the supply of land for new housing and to encourage private investment in providing services such as sewerage are also expected to form part of the wide-ranging package.

The measures are being prompted by fears that many first-time buyers are being priced out of the market.