Joan Burton (Dublin West, Labour)
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Question 7: To ask the Minister for the Environment, Heritage and Local Government the steps he is taking to assist persons in housing affordability black spots, such as Dublin, in view of the fact that house prices in the capital have risen by 2.8% this year compared to a rate of 2.4% elsewhere in the country. [16455/06]

Noel Ahern (Dublin North West, Fianna Fail)
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First-time buyers' access to affordable home ownership is a Government priority and the delivery of more than 500,000 new homes since 1997 has enabled an unprecedented number of first-time buyers to access home ownership during that period. Affordability has also been improved through other specific action targeted for first-time buyers, including improvements in tax reliefs and stamp duty, as well as investment in affordable housing initiatives.

Increased delivery in Dublin is being supported by addressing infrastructural deficits and opening up new areas for development. Some 18,000 new homes were completed in Dublin in 2005, which is more than double the rate for 2001. The Government has prioritised the particular affordability issues of the Dublin area by establishing a new agency, the affordable homes partnership, during 2005 to co-ordinate and add impetus to the delivery of affordable housing in and around the capital. The partnership is now well established and is making good progress on the implementation of its work programme.

Nationwide, local authorities are working through their housing action plans to deliver affordable housing in areas where market provision does not meet demand for lower income groups. Output is growing under these schemes, with 2,900 households assisted in 2005. A sharp increase is expected in the next three years, with 15,000 households likely to benefit under these schemes.

Tommy Broughan (Dublin North East, Labour)
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I thank the Minister of State for his reply. Was he disturbed by the report in this morning's edition of the Irish Independent, which indicated that at present, up to one eighth of first-time buyers take out 40-year mortgages? These mortgages are of an amazingly long duration and such people may pay up to €120,000 more for their houses. As the newspaper noted this morning, effectively, young buyers will end up renting their house for the entire term.

Second, does the Minister of State accept that amazingly, house prices are rising 3.5 times faster than one year ago and that the average price in Dublin is approaching €400,000? It stands at €385,000 at present. Does he agree this is a daunting prospect for young buyers and couples?

Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Deputy should be brief. Four other Deputies wish to contribute.

Tommy Broughan (Dublin North East, Labour)
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Very well. The Minister of State read out last year's record on affordable housing, which constituted an improvement. However, does he agree there is still an issue regarding the Part V loophole?

Noel Ahern (Dublin North West, Fianna Fail)
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The answer in respect of the Deputy's point concerning the percentage of people with 40-year mortgages is "Yes". I am concerned and have said so several times. While it is easy to blame the developers for rising prices, in the past 12 months, the amount of credit provided by financial institutions through various gimmicks, such as 40-year mortgages, 100% mortgages, interest-only mortgages and other initiatives in an extremely tight market has been extremely inflationary. It has increased prices. Buyers always wish to join the housing market and some gimmicks, such as 100% mortgages, have brought forward demand. People may decide to opt to take out a 100% mortgage now, whereas previously they had been considering the purchase of a house in 2008 or 2009. When this is added to the additional 90,000 people participating in the economy, as well as the 70,000 people who entered the country last year, I accept that enormous pressure exists.

The national average price for a new home is €287,000, while it is €360,000 in Dublin.

Tommy Broughan (Dublin North East, Labour)
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The figure I have is €384,000.

Noel Ahern (Dublin North West, Fianna Fail)
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These are official figures. I accept that some estate agents have produced figures based on their own data. In any event, this constitutes the average price for a new or second-hand home. First-time buyers opt for cheaper homes. The average prices are beefed up by second-hand established homes, of which there is always a shortage. As the careers of those people who may have moved 20 or 30 miles out of the city progress, they return to Glasnevin, Clontarf, Clonskeagh or wherever. There is particular pressure on such established second-hand homes.

Overall, we are in a spiral at present. Early last year, most predictions were for an annual increase of 5% or 6%. However, prices took off last year in the middle of the year. While this may have been partially due to the state of the economy, it was also due to the financial institutions, particularly those which introduced 100% mortgages. This appears to have propelled us into a new cycle in which we remain at present. While there have been many predictions to the effect that we will escape from it as the year progresses, at present, as the Deputy noted, prices are rising by more than 1% per month. We are doing everything in our power to slow that down.

Fergus O'Dowd (Louth, Fine Gael)
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Does the Minister of State agree that we are now faced with the first generation of young people, particularly in Dublin, who cannot afford a house in their own locality and have been driven out to surrounding counties such as Wicklow, Louth, Meath and even Wexford, as well as Portlaoise and other cities and towns? Should the Minister of State draw up a new strategy for first-time buyers as they are not the dominant force in the housing purchase market? Does he have any special strategy to assist first-time buyers?

Ciarán Cuffe (Dún Laoghaire, Green Party)
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Does the Minister of State not admit that, in effect, the continued increases in house prices constitute a tax on the young? While older people benefit, younger people feel the pinch. Does he accept that his brother, the Taoiseach, has added fuel to the fire in recent weeks with his comments concerning house price increases? May I ask the Minister of State——

Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Sorry, Deputy, you may not because I wish to call Deputy Finian McGrath and six minutes have already elapsed. You have asked two questions.

Ciarán Cuffe (Dún Laoghaire, Green Party)
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My last question took only approximately five seconds.

Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Yes, however, that would make three questions and the Minister of State would seek additional time in which to answer them.

Ciarán Cuffe (Dún Laoghaire, Green Party)
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The first two questions were rhetorical remarks.

Finian McGrath (Dublin North Central, Independent)
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Does the Minister of State accept that we face a major housing crisis in this State and that something must be done in this regard? Matters have gone out of control. While the NESC has recommended that 10,000 units be built each year, the current provision is for half that amount. Does the Minister of State accept that we face a major housing crisis and what does he propose to do about it?

Noel Ahern (Dublin North West, Fianna Fail)
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Deputy O'Dowd referred to people's inability to buy in their own locality. That has always been the case.

Fergus O'Dowd (Louth, Fine Gael)
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I referred to first-time buyers in Dublin.

Noel Ahern (Dublin North West, Fianna Fail)
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That has always been the case. I have been around for some time and one must always——

Fergus O'Dowd (Louth, Fine Gael)
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They cannot buy houses within the city of Dublin.

Noel Ahern (Dublin North West, Fianna Fail)
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——buy elsewhere. However, I accept that some Dubliners have moved to the vicinity of Drogheda. They are all right, if one speaks nicely to them.

Fergus O'Dowd (Louth, Fine Gael)
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In footballing terms, they fly the wrong flag.

Noel Ahern (Dublin North West, Fianna Fail)
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The Deputy should not be scared of them. However, the first-time buyer is still a major player in the market. Although prices have risen, it is a question of affordability. The real test concerns the percentage of one's take home pay which one spends on one's mortgage. If one reviewed the position that obtained 20 or 30 years ago, one would probably find that in many cases, it was not significantly different, particularly in those cases where two people work. That is the key point. While prices have risen, interest rates and personal taxes have fallen and salaries have risen.

I am not happy and I do not think it fair that developers and financial institutions were the entities which made large amounts of money based on falling interest rates. However, the key question pertains to the affordability index and the percentage of people's take home pay which is involved.

Young people are doing reasonably well. While they buy new homes which appear to be extremely expensive, they appear to be able to furnish them etc. It has been some years since I bought my home.

Ciarán Cuffe (Dún Laoghaire, Green Party)
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They are obliged to commute from Wexford to Dublin.

Noel Ahern (Dublin North West, Fianna Fail)
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They do not appear to be overly deprived and seem to manage. I accept that expectations are higher. The potential problem with mortgages concerns future increases in interest rates. This is where real concerns may arise. Financial institutions are supposed to conduct stress tests. However, I have heard rumours — I do not have the facts — that they do not perform stress tests as thoroughly as they should in all cases. The danger is that if interest rates rise, people could encounter difficulties in cases in which stress tests were not conducted properly, if take home pay remained static and the economy weakened. However, it is hard to cope with a situation in which the economy powers ahead in tandem with such high demand. We now face an entirely different world. I do not use words like "crisis".

Ciarán Cuffe (Dún Laoghaire, Green Party)
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What crisis?

Noel Ahern (Dublin North West, Fianna Fail)
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In the main, Question No. 7 pertains to affordable houses. My understanding is that Deputy Finian McGrath has attempted to raise the issue of social housing. This year's budget for social housing is €1.4 billion, which constitutes a significant sum of money. The output for local authority houses last year was the highest for 20 years. The number on the waiting list was down 10%, and if we could double the output, we could allocate houses to all these people. We are making progress. The various methods in place are helping. While the average price of houses keeps increasing, a study states that the average price for first-time buyers has decreased by 13%. As a result of the affordable schemes, there are a number of houses for first-time buyers throughout Dublin which cost under €200,000. To promote the schemes more, local authorities must advertise them strongly.