Homeowner bailout becomes a blunder
Published 05/02/2010 | 05:00
No sooner did the Government flag a rescue package for financially distressed home-owners than the move came in for some surprising criticism. Some first time buyers who want to get on the property ladder are concerned that any bailout for existing home owners would mean that these distressed properties are unlikely to come on the market and consequently house prices will not correct as much as they should.
Another group, frightened by escalating prices into buying apartments during the boom, may have hoped that the downturn would provide them with an opportunity to move to a house which could accommodate a growing family. However they may now fear that a bailout package will enable troubled owners to hold onto their homes. Consequently, as some agents expect, there could be a shortage of family houses in areas of Dublin.
City dwellers who were priced out of their neighbourhood and bought in the commuter belt have been hoping that the downturn would allow them to move closer to families or work. As Dublin prices fell faster than commuter prices, the gap narrowed. But the bailout may halt further narrowing.
Prudent buyers may ask why help those who lied about their income in order to get bigger mortgages to buy a bigger house, or help those who didn't save deposits and got 100pc mortgages, or aid those who availed of parental wealth to outbid other buyers. All of these people contributed to the price spiral -- a key factor in the banking crisis.
However if the Government does nothing, then troubled home owners will transfer to social housing and the taxpayer will have to pay for their accommodation in extra taxes.