Sunday 22 April 2018

Home truths: No hall door key for first-time buyers

In a week when Simon Coveney pledged to solve the country's housing crisis, our reporter talks to industry experts fearful we've got it all wrong - yet again

Feeling the stress: Like many renting, Ruairi McKieran is at the mercy of his landlord. Photo: Andrew Downes
Feeling the stress: Like many renting, Ruairi McKieran is at the mercy of his landlord. Photo: Andrew Downes
Simon Coveney
John Meagher

John Meagher

It was billed by some as the most ambitious housing plan in the history of the State, a strategy that would finally tackle Ireland's chronic property shortage. But when he launched 'Rebuilding Ireland' this week, Housing Minister Simon Coveney offered little concrete proposals to cheer up a demographic that might feel especially hard done by - first-time buyers.

Although there were several initiatives to help alleviate homelessness and tackle social housing, first-time buyers may have felt their predicament had been pushed to the side again.

Instead, there have been vague promises that such people would be catered for in October's Budget and Minister Coveney has talked about introducing a tax break, or grant, to make it that bit easier for first-timers to buy their own homes.

But such plans don't sit well with Karl Deeter of the Irish Mortgage Brokers. He believes the only way large swathes of first-time buyers can fulfil their dreams of owning their own homes is if enough suitable properties are built. "Incentives on the demand side of things is not where the solution is," he says. "It might have worked in 2010 or 2011 when the market was really deflated, but not now."

Simon Coveney
Simon Coveney

For some, the measures can only do one thing: push up house prices. That was the view of economist Colm McCarthy, who was speaking at the MacGill Summer School, Glenties, Co Donegal, this week.

"The problem with giving grants to people who might be thinking of buying houses is that it doesn't summon forth any additional houses. It does summon forth additional people who might be trying to buy them and it will push up the price of houses."

Coveney is adamant that such a result will not happen: "I have heard some criticism that if you give first-time buyers more money to buy a house, that simply just overheats the market even more.

"We are only talking about giving first-time buyers the capacity to raise a mortgage more easily for new houses, at a certain price level. Whatever we do for first-time buyers, it must drive supply as opposed to simply overheat demand."

Karl Deeter is not convinced. "What needs to be done," he says, "is to make it more attractive to build more homes - but in the right places.

"The mistakes of the boom years shouldn't be repeated. No more ghost estates."

That legacy still haunts the Irish housing market. According to the census figures unveiled earlier this month, there are almost 260,000 vacant homes across the country. And yet, the supply of housing for sale is at its lowest level in 50 years.

Michael O'Connor, chairman of Real Estate Alliance, says while he welcomes any measure to help first-time buyers - and movers - the most important thing is to ensure that demand is met by supply. "It has to be more attractive for developers to build new homes," he says.

"The VAT rate needs to be lowered from 13pc to 9pc. The builder needs to be incentivised and while some might be irritated by that idea, they also need to make a profit. If the housing isn't built the problem won't be alleviated and we'll probably be talking about an even worse situation in five years' time."

O'Connor, who is Limerick-based, says there is a huge discrepancy between Dublin and the rest of the country when it comes to first-time buyers.

"It's not so bad for those outside the capital where, in many cases, they're able to buy properties that require a 10pc deposit [Central Bank rules stipulate that first-time buyers must have 10pc of all home values up to €220,000 and 20pc for the balance after; it's a flat rate of 20pc for all other buyers]. But in Dublin, with the average price of a house at €349,000, they can really struggle to save for the deposit, so I think the 10pc threshold should be increased for Dublin, to maybe €350,000."

Spiralling rents - even steeper now than they were at the height of the Celtic Tiger - mean that a whole raft of would-be buyers simply cannot make sufficiently high monthly savings. Deeter says an apartheid system has come into play since the Central Bank ruling. "You've got those whose parents are wealthy enough to help, and those who get no parental help," he says. "That's the key difference and another advantage for the haves over the have-nots."

The age profile of first-time buyers is shifting too. A survey published by Real Estate Alliance last month showed that the average age of these buyers has gone up by five years since 2010, from 29 to 34.

Michael John Winters is 34 but is a long way from having the capacity to buy his own home. A vet, whose wife also works in the same profession, he is a newly-returned emigrant, having come back to Ireland in the last few weeks after three years living in Toronto, Canada.

"It's an expensive business to pack up and emigrate home and you have to build up your profile with the banks again," he says. "For now, the priority is trying to get established as a vet here, to locate to the right part of the country."

He hopes that October's Budget can put steps in place to ensure that when he is in a position to buy a home, the market will be more stable than it is today and there will be a far larger housing stock available. "You see people of my generation and younger being forced out of Dublin because of rising rents and so on, but there's a shortage of supply in certain parts of the country too."

Father-of-one David, 32, from Dublin, relocated to Portlaoise last year. He says he felt he had little choice because he was struggling to keep he and his young family above water financially, and that was before he was informed that his rent was being hiked up.

"We were paying €1,300 a month for a two-bedroom apartment and then got a letter from the landlord to say it was going up to €1,600 because it was the market rate. This happened around the time [then Minister] Alan Kelly was talking about bringing in a two-year freeze on rents, and we weren't the only one to face such an increase.

"My work allows me to freelance, so location isn't hugely important, so myself and my girlfriend started to look around and see where we could rent that was reasonably affordable and not too far from Dublin. Portlaoise stood out, and we're paying €800 a month - exactly half of what we would have had to pay to stay in Dublin. It may not be ideal to be living away from what both of us consider to be home, but at least we're getting to save towards the deposit for a mortgage now, so we feel like we're heading, slowly, in the right direction."

If many potential first-time buyers have had to relocate to afford the rent, so too are they relocating to buy. The most recent survey on house prices by, published at the beginning of the month, shows that the greatest yearly jump in prices were in counties such as Kilkenny (13.5pc), Westmeath (13.4pc) and Laois (11.6pc).

It seems to be evidence that the housing shortage is leading once more to commuter-belt living. "For some people, it works," says Karl Deeter. "And they make their lives in these places. But, for others, it can be a miserable existence, especially if they find themselves being stuck in cars for hours every day."

But even they, as house-owners, might be considered fortunate by those stuck in a rental market where their monthly outgoing is still seen as dead money. It's an especially bitter pill for those living in Dublin to swallow, as rents now are typically higher than mortgage repayments.

"I've been a freelance musician for over 15 years now," Eoghan Scott, 35, says. "Yet it's really hard to get a mortgage. I've always made very good money and have been paying my taxes too. Myself and my wife have never even missed one rent payment. It pisses me off that it's so hard to get a mortgage and it really annoys me that they don't take rent payment into consideration."

It's a sense of despair and frustration that is echoed by many of his generation and they will be hoping that Minister Coveney - comparatively young at 44 - will be the minister who succeeds in alleviating a problem that has been arguably the country's most critical issue for the past decade.

'Young people are barely hanging on'

Social campaigner and member of the Council of State, Ruairí McKiernan (38) is perfectly placed to appreciate the severity of Ireland's housing crisis.

"It's reached breaking point," he says. "The young people I encounter are barely hanging on. It's no wonder rates of homelessness continue to rise. Rents have increased by up 50pc in some places, wages are stagnant, childcare costs are crippling and stealth taxes keep coming.

"All this means it's nearly impossible to save for a deposit for a mortgage, especially in the cities. It's easy to see why people are delaying having families or deciding not to have kids at all. There's a lot of anxiety out there and very little in the way of real visionary leadership."

McKiernan says he understands the worry 'Millennials' feel, because he experiences it too. "My wife and I are both affected. We're at the mercy of our landlord and it's incredibly stressful. He's a decent guy, but we may ultimately end up being forced to leave Dublin, which is where we have our friends and community.

"We're now told that we should give up on the idea of owning a home, something that would leave many people at the mercy of the rental market and what is often-sub standard accommodation with no long-term rent certainty. The average worker works for over 40 years of their life. Surely owning a home should be a reasonable expectation?"

McKiernan says Ireland's young have been worst hit by a recession that still lingers beneath the surface. "We're told we're all sharing the pain, but that's not true," he says. "Research shows that the wealth of Ireland's richest has actually grown over the past few years. Austerity has been a great vehicle for wealth redistribution and the housing fiasco is at the heart of this.

"We have a situation where approximately a quarter of TDs are landlords and that percentage is much higher in the bigger parties. The public space is being handed over to the private sector on the assumption that the market will provide. This isn't happening. It's clear the State must intervene and fast. The question is, who will benefit from the latest plans? Is this going to be another case of bad planning and quick-fix solutions based on shoddy buildings with little community infrastructure?"

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