Wednesday 7 December 2016

First-time buyers' grant will only push up prices

The Government's latest plan to tackle housing problems is careless and will do more damage than good

Published 16/10/2016 | 02:30

Why stimulate demand in Dublin when supply problems have already pushed prices (and rents) up? Photo: Getty Images
Why stimulate demand in Dublin when supply problems have already pushed prices (and rents) up? Photo: Getty Images

The Government's plan to re-introduce the first-time buyers' grant has received a cool response from housing experts. They think it will encourage demand rather than supply and will facilitate a bidding-up of prices by purchasers.

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The Central Bank, according to Michael Noonan on Budget day, has accepted that the grant money will be allowed when calculating the deposit required of purchasers under its mortgage lending rules. It could hardly do otherwise: the source of the deposit money is not the Central Bank's business and it would not disallow deposit money that came from a relative. But it can hardly be happy to see the Government borrowing more money to play the rich uncle in the Dublin market, already at risk of a bubble repeat.

Anything which stimulates demand will push up prices, particularly in Dublin and a few other urban areas. The housing affordability problem is not national: houses are perfectly affordable in most parts of the country. There are three times the number of residential units for sale at under €150,000 in Co Mayo alone than in Dublin city and county combined, according to daft.ie. Why introduce a nationwide scheme to address what is mostly a Dublin-area problem? Why stimulate demand in Dublin when supply constraints have already pushed prices (and rents) way ahead of common-sense levels?

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