Relaxing of Central Bank lending rules will promote more construction of new homes - Regency
Published 03/04/2016 | 02:30
A relatively small change in the Central Bank's mortgage lending rules would allow a lot more people to buy property and could help free up badly needed rental accommodation, a leading developer has said.
House builder Regency believe that if the Central Bank increased the loan to income rule for banks handing out mortgages from 3.5 times income to 3.75 times it could make a big difference to people trying to buy a home.
The property developers say that the contentious home loan caps have had "the perhaps unintended but negative consequences of pushing more and more people into the commuter belts of big cities - particularly Dublin".
"This is culminating in urban sprawl - bringing with it long commuting times, traffic congestion and other challenges associated with this housing pattern. Regency supports contentions from other market commentators that these rules are also forcing more people into the rental sector which is already hitting record inflation levels".
While it is unlikely the Central Bank rules will be removed altogether, tweaking the loan-to-income rule to allow people borrow up to 3.75 times their income could significantly boost the number of average income couples qualifying for a typical starter home in Dublin, enabling them to avoid long commutes, Regency believe.
Aodan Bourke, Director at Regency, (pictured) commented: "The increase in rents has been the biggest contributor to the homeless crisis as people on rent support/supplement are unable to compete with the private sector for a limited number of properties.
"We believe that the Central Bank rules are slowing the migration of people from rental to purchase, which is having a knock on impact on everyone else in the rental sector.
"Recently Lars Frisell, adviser to Central Bank governor Philip Lane, made some worrying remarks around the rules when he stated that the loan caps will neither add to nor relieve the shortage of new homes. But the logic is simple, if people cannot buy then builders cannot and will not build.
"It's unusual for [us to] say it, but we would like to see more competition in our sector," Mr Bourke added.