Tom Barry (Cork East, Fine Gael) | Oireachtas source

I welcome the Governor. It was interesting to hear him state that houses might still be overvalued. In 1991, a three bedroom house could be purchased for €38,000. The cost of that house then ballooned to €280,000 before subsequently dropping again. One is obliged to wonder what is the real value of such a property. When discussing affordable housing, we must not lose sight of the importance of amenities, etc. One of the mistakes made in the past was that housing was constructed but no amenities were put in place. There is a two-tier system in place at present. Dublin has many issues when it comes to housing but the dynamic in respect of the remainder of the country does not reflect this at all. I am in the unenviable position of being a landlord. In the past it was possible to charge €1,000 rent for an apartment in Cork. The figure dropped to €750 but has risen again, although only to €890 or €900. Rents have not returned to previous levels at all because demand is only okay - it is not accelerating.

I put it to Professor Honohan that many investors who bought into the rental market when it was at its height now want out. They cannot get out, however, because if they sell, they will immediately crystallise their negative equity. Many of these people became involved in the sector because their businesses were successful and they used their disposable income to invest. Apartments in Cork which previously would have cost €320,000 are selling now for €130,000. That is a massive reduction. In nearby counties, houses which previously would have sold for €200,000 now cost €100,000. The people who bought properties are making a loss of €7,000 on them each year. That is going to be the case for the next 15 years at least until these properties are washed out of the system. I have heard all the arguments put forward and I agree with some of them. Creating employment in rural areas would certainly help because people would be brought to places in which there is existing and affordable housing. However, using a one-size-fits-all solution for Dublin and the remainder of the country is not the way to go. People must recognise that two different dynamics are at play.

Legacy debt remains an issue. Many SMEs that would have become involved in the area of property remain saddled with their investments. I commend the banks because they have the expertise to deal with this matter and they have finally begun to examine it. Previously, they had stood apart from any involvement. Many businesses are under pressure as a result of bad investments and they have difficulties with regard to arrears. The split-mortgage proposal put forward in the Keane report could have been pursued more vigorously in the context of the SME sector in order to resolve the problem of overhanging debt. I am aware of people who obtained 20-year mortgages in dubious circumstances. Expecting these individuals to remain healthy and wealthy up to the age of 70 was always going to be a big ask. Interest rates remaining low has been a saving grace. When we obtained our mortgage in 1997, the rate which applied was 7.7% and we were delighted with that. I have heard people criticising mortgage interest rates of 4%. If one cannot afford to pay that rate of interest, then one should not be getting a mortgage. In historical terms, 4% is a low interest rate. However, Professor Honohan may disagree. As already stated, the pillar banks have come a long way in terms of dealing with this matter.

Is Professor Honohan of the opinion that there is a need to establish a commercial bank - in the past we had the ICI - to deal with SMEs? Such a bank would have the expertise to assist SMEs with their legacy debt and their links to the property market and could provide them with finance into the future.