Friday 13 December 2019

The rising tide that needs to be dammed - and fast

By Niall O Loughlin
By Niall O Loughlin
Martina Devlin

Martina Devlin

An ad jingled on the radio while I boiled the kettle for coffee yesterday morning. 'The Loop', a shopping facility at Dublin and Cork airports, urged people to take an overseas holiday especially to avail of duty-free champagne.

What could be jollier than some rampant consumerism at breakfast? Three cheers for the recovery! But wait, a news report followed about how thousands of people on modest incomes will never be able to afford to buy a home, according to the National Economic and Social Council.

Hold the hurrahs. No need to have Fidel Castro's instincts to find that dichotomy distasteful: let the good times roll again - for some.

On the same day, we heard that house prices shot up by just over 16pc nationally in the year to October, and by 24pc in Dublin - the fastest rise since the market began to recover. The CSO Property Price Index figures will be no surprise to potential home-owners immobilised by the rapid price surge, or sidelined by sellers prioritising cash buyers. Driving the increases are supply shortages; an attempt to dash over the line ahead of new Central Bank lending restriction; and investors rushing in before tax breaks are closed off.

This week, I attended a read-through of 'Let The Market Decide', a clever new satire by Katy Hayes at the Pavilion Theatre which casts a cold eye on, among other matters, our national obsession with property ownership. The audience laughed with recognition at the pretension of a young couple at the height of the boom cycle, who bought a five-bedroom house as their first home. "They're not selling houses anymore, they're selling the dream that we can all live like posh Americans," observed one of her characters.

Still, a housing bubble will never inflate again because we've absorbed the lesson of the collapse, right? An end has been put to ludicrous overreaching. To personal debt mountains. To believing happiness lies in sprawling haciendas with more marble fittings than the Parthenon.

If only. Unfortunately, memories are short, judging by the hostile reaction to Patrick Honohan's proposal to introduce mortgage restrictions, with 20pc deposits for property purchases, and loan limits set at three-and-a-half times a couple's combined salaries. Predictably, those leading the charge are mortgage brokers and senior bankers, with a number of politicians also in the vested interests' camp.

There are some drawbacks to the Governor of the Central Bank's plan, although I believe the pluses outweigh the minuses. It's true that a two-tier property-owning society might emerge, the advantage tipping towards people with access to cash for a deposit. Those without capital, even if they hold down responsible jobs, will be handicapped compared to those with capital. This is not progress. However, neither is another housing bubble. Countries using high deposit versus loan ratios have proven more resistant to property collapses.

But what to do about the group priced out of the market? It's not unusual now for properties to be 10 times a buyer's annual salary, as opposed to four times when I was starting out: the struggle to buy is arguably more intensive. In 'Let The Market Decide', the young couple couldn't afford to have a second child because they needed a dual income stream to service their house loan. That was a Celtic Tiger scenario - yet it hasn't been eradicated.

Home ownership isn't one of life's essentials. It's not intrinsically unjust for it to be beyond the reach of some. But an even-handed society is a must. So when scarce, poor quality or expensive rental accommodation is the alternative to ownership, fairness is lacking. How to redress this?

A rent-controlled private sector isn't necessarily the answer - in New York, it leads to a lucrative market in illegal sublets. Instead, there should be limits on the amount by which landlords can raise rents, while property inspections are needed to keep them up to standard. Too many hovels continue to be foisted on tenants with limited choices.

In addition, an increased supply of social housing is vital, and the Government is taking this on board with its strategy to address the housing shortage. The programme it has laid out needs to crack forward without delay.

But spending on social housing was curtailed during the recession and it will take more than what's envisaged here to redress the impact of long-term under-funding.

Finally, builders need to be incentivised to build - in places where demand exists, not the back end of nowhere - and some are discouraged by VAT rates and local authority levies. These are issues which could usefully be addressed.

Meanwhile, we need to see cranes on the skyline again. And while that's a sight worth celebrating, let's go easy on the champagne.

Irish Independent

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