Gerlach: Rethink of housing policy needed to avoid a crash
A fundamental rethink of housing policy is necessary if a repeat of Ireland's financial crisis is to be avoided, a former deputy governor of the Central Bank has warned.
Stefan Gerlach, who left the financial regulator last year to take up a post as chief economist at BSI Bank in Zurich, warns that the focus of debate in Ireland must shift from access to affordable mortgages to housing policy.
The top economist says he finds it "astounding" that there has been "so little public debate on whether the structure of the property market and the mortgage finance system is at all appropriate in the wake of the catastrophe that befell Ireland".
Writing in today's Sunday Independent, Gerlach says: "While there is broad agreement [on] what caused the crisis, few, if any, commentators have asked what the broader lessons for the property market are. Instead, the debate has immediately reverted back to what needs to be done for people to be able to purchase a property in much the same way as before the crisis."
Government policy must be about "finding ways to ensure quality housing can be built at affordable prices. And it means providing good alternatives to those who do not want to, or can't, buy their housing," he says.
But he says consumers face a stark choice if they want to avoid a new property bubble: "Do we want mortgages for all, at the cost of running the risk of another property bubble with massive social and economic costs? Or do we reduce risks to the banking sector and of another boom-bust cycle, at the cost of restrictions on risky mortgage lending?"
Sunday Indo Business