Friday 21 October 2016

Lessons from bust may be lost if homes remain beyond reach

Gerard O'Regan

Published 30/01/2016 | 02:30

Back in the real world of Ireland 2016, some old and new challenges once again loom in the housing mortgage market.
Back in the real world of Ireland 2016, some old and new challenges once again loom in the housing mortgage market.

Having been among those summoned by the Banking Inquiry collective - and charged with confessing any or all sins which helped prime the property bubble - meant its final deliberations were of more than passing interest.

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One was struck when sitting among the assembled politicians that despite all their earnest questioning, there was a kind of will-of-the-wisp dimension to the whole thing. The horse had already bolted. Hog-tied by various restrictions and legal constraints, could they really shed any new light on the miasma, self-loathing, and never-ending blame game, spawned by our economic meltdown?

To some observers, the inquiry findings may seem to be somewhat underwhelming. In very simple terms, the main conclusion of this massive probe is that the economy went belly-up for a host of different reasons. There was no single event which proved a catalyst for the disaster which engulfed so many. The generality of the findings are also a reminder that real retribution for alleged wrongdoing during the madcap years can only come about by way of Garda investigations. And it is then up to the DPP to determine if there is a case to answer - before the courts pass judgment.

Much hype and hoopla surrounded the setting up of the inquiry. It was to be a catharsis. At times it was dogged by a kind of high-minded self-righteousness tone struck by some politicians grandstanding for the nightly TV news. Yet the final report has been forced to strike a note of humility - the sheer complexity of what caused the collapse of the Tiger defies simple explanation.

However, this marathon think-in will also have been therapeutic for many members of the public. They will have enjoyed seeing sundry financial and political heavyweights appear 'in the dock' so to speak, forced to render a very public account of their stewardship.

Thankfully we now have better financial regulation than in the past. But this is only a limited safety valve. We should not forget the ultimate overseers of our financial system remain our politicians - more specifically the government of the day. And in the main, the political instinct is to go for the vote-getting policies of populism. Such was the case in the free-wheeling Celtic Tiger times, and the main cause of our collapse.

Looking back, there was a deafening silence from the political world, regarding any possible tax clampdown on builders or house buyers to try and ease the construction bubble. At the time, it would have taken raw political courage to put the much-vaunted national interest ahead of political self-interest. The feelgood factor was dizzying - what with high-spending weekend shopping trips to New York on the rise. Being a cheerleader for the boom was intoxicating for public representatives across the political spectrum.

The banking report also provides a chilling reminder of just how vulnerable and alone a small open economy like ours can find itself in the take-no-prisoners world of international high-finance. When the witching hour came, Ireland Inc was no match for the tough-guy approach of the ECB. Its mantra was simple: we had messed up, now we would pay the price; we would be on our own; there would be no "burden sharing".

We had no choice. If we did not play ball, they would pull the plug on the desperately-needed cash essential to keep the country ticking over. During those fateful times, the future of Irish economic sovereignty hung by a thread. This is the most important lesson of all from those dark days.

Meanwhile, back in the real world of Ireland 2016, some old and new challenges once again loom in the housing mortgage market.

How the next government responds may be a sign of how our political masters have been fashioned by the legacy of recent travails.

The current problem is that a growing number of potential first-time buyers maintain that revamped mortgage guidelines are making it impossible to get on the property ladder.

They argue the level of savings and deposits required is too high given average income levels. It is a key issue for young couples, particularly in Dubin and other main population centres where house prices are highest.

The antenna of the typical TD is picking up such concerns. It is not improbable there will soon be a growing demand for less rigorous borrowing strictures. But will that fuel high-risk lending, and the possibility of default by overstretched house owners, while artificially inflating the construction industry? The conundrum all sounds a bit familiar. Could it be a case of back to the future?

A truism for old-style Fianna Fáil used to be: if the typical young garda and nurse can't buy a house together, there's something seriously wrong with the world - and it's a problem that has to be fixed.

It's just that nowadays we know the dreaded ECB is watching to see if we get up to any of our old tricks.

But in the meantime, what is to be done about the garda and the nurse who simply want to buy a home of their own?

Irish Independent

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