Wednesday 13 November 2019

Mark Keenan: Government is treating cancer of housing crisis with sponge baths and aspirins

Governor of the Central Bank Patrick Honohan
Governor of the Central Bank Patrick Honohan
Mark Keenan

Mark Keenan

There is a general sense of grievance throughout the professional property sector, which has been on its knees for six years.

They believe the Central Bank lending control measures, introduced at the beginning of this year, have failed miserably, and point to the increasing numbers of city dwellers aged between 25 and 45 who will not buy a home of their own as a result.

But on the contrary, the policy has been a roaring success - in that it has absolutely achieved all of its objectives and goals. When the Central Bank stepped in to apply these measures, it was during a market in which city prices had been rising by 15pc per annum. It was in a market in which lenders were on the cusp of entering another early noughties-style mortgage war.

The stated goal of the lending clampdown was to take the heat out of the market, to head off a new lending splurge.

The policy has been a success on every count - most Dublin properties are falling in value while those in the cities of Cork and Galway are now static. Lending has fallen off, with cash buyers now in the ascendancy again in the capital. Job done.

The Central Bank stated at the time of launching these measures that it was not responsible for housing supply - a pointed barb aimed at the Government in Central Bank speak.

When it comes to the housing crisis at all levels, this Government has been treating a cancer with sponge baths and aspirins.

It talks about rent controls and penalising landlords who don't take social housing tenants, instead of demolishing the barriers to providing more housing. However, we can't forget that the social cost of the Central Bank doing its job and the Government not fulfilling its role is that thousands of city couples are denied a home. The cost of the Central Bank measures and no Government measures is a market where cash buyers are screwing disenfranchised buyers in the rental sector. Those people will now pay far more in rent than they ever would have paid to service the mortgage loans they would have qualified for a year ago.

In the absence of supply, prices will rise again in our big cities despite the bank measures - driven this time by the investment seeker and cash buyer eyeing up captive couples. Can't buy, can't save. Renting for always and a captive asset to milk dry.

Irish Independent

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