Sunday 25 September 2016

Central Bank accused of 'deliberately promoting renting over ownership'

Published 24/03/2016 | 02:30

The accusation comes in reaction to the paper delivered by senior official Lars Frisell in Sweden earlier this week
The accusation comes in reaction to the paper delivered by senior official Lars Frisell in Sweden earlier this week

Property sector representatives have accused the Central Bank of deliberately promoting rental over home ownership in the wake of a speech made by a senior official to a European audience.

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In reaction to the paper delivered by senior official Lars Frisell in Sweden earlier this week, the Institute of Professional Auctioneers and Valuers (IPAV), which represents almost a thousand auctioneers and valuers, says it will seek formal clarification from the Central Bank next week on whether its policy on lending control is intended to steer people from home ownership to rental as per a typical European model.

Mr Frisell, advisor to the Governor, stated that mortgage deposit rules, introduced to control lending in Ireland, "should contribute to a shift in both housing demand and supply towards rental accommodation".

IPAV's CEO Pat Davitt said, following Mr Frisell's comments, "questions must be answered" and that he is writing to the governor for clarification.

"One of the perplexing issues in the latest Central Bank statement is that the bank is unequivocal in accepting that the rules 'should contribute to a shift in both housing demand and supply towards rental accommodation'.

"The question we would ask here is: are Irish people demanding a move towards a rental market rather than purchasing, or are they being forced into it by the Central Bank's own rules?"

Meanwhile, Karl Deeter of Irish Mortgage Brokers described Mr Frisell's comment as "effectively engaged in social engineering".

"If they know that shifting people from ownership and into rental is the outcome of their policy, and they keep on doing it, then we have to assume that this is the outcome they have been pursuing," he said.

Mr Frisell's speech follows a paper to an economic conference last year by then Central Bank Deputy Governor Stefan Gerlach, in which he identified high ownership economies as being more prone to economic upset. He said that wider use of rental resulted in less risk to economies overall.

Mr Davitt added: "Is it that policy makers and regulators think this is what we in Ireland should aspire to because it is perceived as a successful model elsewhere in Europe and therefore, use all policy instruments to achieve that, regardless of consumer sentiment or needs?"

When contacted yesterday, the Central Bank would not state whether policies towards lending were intended to favour rental.

A Central Bank spokesman reiterated that a review of the mortgage deposit rules is due in November, but added: "The LTV/LTI rules will remain as a permanent feature . . . to avoid boom bust cycles and over indebtedness."

Irish Independent

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