Thursday 23 January 2020

Home truths: Different policies but same results

Dublin house prices have now run into the category of 'seriously unaffordable'.
Dublin house prices have now run into the category of 'seriously unaffordable'.
Mark Keenan

Mark Keenan

As Fianna Fail and Fine Gael continue to butt heads over the formation of the next Government, we have heard much about the ideological similarities which should make the Civil War parties natural bedfellows.

But on housing, it is worth noting that a succession of Governments led by both parties have somehow managed to achieve the exact same thing - runaway inflation, affordability issues, homelessness, the collapse of the social housing model and the continued erosion of Ireland's tradition of home ownership.

It says something that 10 years after one of the world's worst ever property crashes, house prices in the Irish capital and in the greater Dublin area have once again inflated to the point of matching those in the world's worst 'bubble' locations.

For a decent and detached international take on the state of Irish property prices, we can take a look online at Demographia 2016 - this year's version of an international study of housing affordability undertaken with input from a number of the globe's leading universities and housing economists. The report relates to property prices as they now stand in a number of 'western' countries.

The 2016 study most recently released asserts that Ireland's housing overall is currently in the category of "affordable" (Limerick is the most affordable of all locations surveyed) but notes that Dublin prices have now run into the category of "seriously unaffordable" on the basis of what an average income can manage.

Only in markets in big Australian and Canadian cities, where bubbles are believed to be underway, can comparisons be found with the greater Dublin area.

In the eyes of the world, prices in greater Dublin are now "seriously unaffordable".

So how did we get back here again - just 10 years after one of the world's worst property crashes almost caused the collapse of the State?

Well we all know what caused the previous bubble and crash.

Ireland had been governed for years by a series of Fianna Fail led regimes which permitted flagrant lending and cosied up to and championed the construction and mortgage lending sectors to a degree that was crassly flagrant and, in some cases, corrupt.

Fast growing property prices became a source of national pride and anyone who suggested property was anything other than a safe investment risked being bullied and ridiculed by the political collective and its industry cronies of the Galway racing tent set. The resulting culture channelled too much investment into property and a credit-led bubble enabled it to self perpetuate. We got dangerous house price inflation. We got the perfect storm.

Fianna Fail led policy failings included the pouring of petrol on the flames by continuance of tax incentives for development and the reduction of stamp duties during times when Irish house prices were inflating at a rate above 20pc per annum. At the same time, loose planning led to overbuilding.

But today, it's the Fine Gael and Labour delivered 'cure' to this illness which has caused a new inflationary bubble.

We moved to the other extreme - we got a Government advised and driven in policy by opposite thinkers - but with another brand of blinkered and flat earth outlook. Instead of those who believed in loose banking and development, we got a regime led by thinking which considered development, property investment, home ownership and mortgage borrowing at scale to be ethically and ideologically questionable.

Under Fine Gael and Labour it seemed there was an anti development and ownership agenda to push people into what many consider to be a more "enlightened" European type rental-dominated market. From a Government which poured petrol on the flames, we got one that instead sucked the oxygen out of the sector altogether. We got a Government that has caused supply-side inflation by abjectly refusing to enable and incentivise construction at a time when construction has never been more desperately required. If anything, it proves Governments which swing from one extreme to the other on housing and development policy, can only cause more of the same problems.

After Governments of both hues have made the same mess, young people in the greater Dublin area and, more recently, in parts of Cork and Galway and larger regional centres have never found it so hard to put a roof over their heads, whether though rental or through purchase.

That we are in a housing crisis has been apparent for many years. But we are now in an emergency. We therefore need the next Government to introduce considered temporary fast-track measures to enable construction. But they must be considered and they must be temporary. Because the temptation now is for a new regime to take another completely opposite stance.

Then we will find ourselves right back to square one.

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