Government must not create house price spike - Slark
Support schemes to underpin growth in the Irish housing market "are a good thing", but should not create short-term spikes in demand or pricing, the CEO of builders merchanting giant Grafton has warned.
"I don't want to take a political view on it, but if we can find mechanisms in Ireland that help to underpin the growth in the housing market, I think that's a good thing, as long as it doesn't create short-term spikes in demand and short-term spikes in pricing," Gavin Slark told the Irish Independent.
His comments came as Fianna Fáil yesterday said it wanted tax breaks for builders to encourage home building. One proposal includes a 9pc VAT rate for the construction sector.
Grafton, a €2bn market capitalisation building materials firm, sees daily evidence of the health of the housing market through its network of outlets in Ireland, where it generated sales of £277m (€302m) in the first half of this year.
Of that, £193m (€210m) was from its chain of Heiton Buckley and Chadwicks builders merchant outlets, and £84.4m (€92m) from its Woodie's DIY network. Grafton generated about 75pc of its total £1.2bn (€1.3bn) first-half revenue in the UK.
"We have to bear in mind that Dublin is the capital and about a third of the population live in the greater Dublin area," said Mr Slark.
"If you look at the cost of living in other European capital cities, such as London, Paris or Madrid, they're expensive places to live. It's a difficult thing to find the right balance between stimulating the market and creating artificial spikes. I would like to make sure that whatever the Government does, that it gives us that medium-term, gradual recovery."
Mr Slark added: "The Irish economy and the housing market is recovering in such a way that it should be sustainable for the medium to long term.
"There are no Hollywood- style gestures going on at the moment, and all is relatively sensible."
But house price inflation in Ireland has rocketed as demand continues to far outstrip supply.
House prices nationally are expected to rise 8pc this year. The Central Bank reckons they will jump 15pc over the next three years.
Mr Slark pointed to the help-to-buy scheme in the UK as having successfully contributed to the housing market for buyers and builders. "Although the help-to-buy scheme in the UK isn't perfect, and it has its critics, what it has done is help to underpin the house-building market there over the past two to three years," he said.
The UK's help-to-buy scheme was introduced in 2013. The first phase of the scheme allowed first-time buyers or movers buying a new-build property to borrow 20pc of the property's value from the government.
The loan was interest-free for the first three years. Buyers had to stump up 5pc of the value of the property themselves, and secure a 75pc mortgage.
Under the second phase, those same types of buyers still had to come up with just a 5pc deposit, while the lender then took out a guarantee with the government for 15pc of the property's value. That enabled the lender to recoup money from the government if the property was repossessed by the lender where the borrower could not pay.
Last year, the Irish Government introduced a help-to-buy scheme for first-time buyers buying or building new homes.
It gives them a tax rebate of up to €20,000. First-time buyers only need a 10pc deposit towards their home purchase, while the Government has not taken any steps to assist boom-time buyers, who still require a 20pc deposit.
The Government could announce in next month's Budget that it will axe the help-to-buy scheme.
Chronic housing under-supply is unlikely to abate for a number of years.