Seán Crowe (Dublin South West, Sinn Fein)
Link to this: Individually | In context

This country is facing a number of crises. We have all realised that a crisis exists in the health services, and a drug epidemic is sweeping the country, especially in terms of cocaine. Figures revealed in the Permanent TSB-ESRI house price index confirm what everybody but the Government believes, namely, a housing crisis has also arisen. House prices have risen by an explosive 270% over the past decade. It must be asked whether the wages of working men and women have increased accordingly. I do not think they have.

The review also revealed that house prices in Dublin are a massive €130,000 more expensive than the rest of the State. In 1996, the difference was €10,000. When I got married 20 years ago, I could not afford a house in Rathfarnham where I grew up, so my wife and I had to move to Tallaght. Now, however, young people from Tallaght have to move as far away as Portlaoise to afford a house. Many of the young people I know must live at home until their late 20s or even 30s. Generations are living in the same house.

The Government emphasises shared ownership and affordable housing, options which are welcome for many people. However, people on social welfare or low incomes do not have the option of buying their homes. The roll-out of affordable housing is not much use to lone parents or part-time workers.

Nine years ago, the Government woke up to the fact that housing problems existed and commissioned Mr. Peter Bacon to compile a series of reports. Mr. Bacon made a number of recommendations but these seemed to have fallen on deaf ears. Investors get mortgage relief on second houses at a cost of €60 million per year to the taxpayer. When this relief was abolished in 2001, the housing market improved. However, despite the recommendation in the Bacon report that the relief be removed for good, it was reimposed by the former Minister for Finance, Charlie McCreevy. The National Economic and Social Council also recommended the removal of the relief because it drives up the price of houses for local people. The Government's priority should be on homes for people, not on holiday homes.

Some 44,000 people are on waiting lists for social housing. Sinn Féin has campaigned for the introduction of a constitutional right to a roof over people's heads. In one of the wealthiest countries in the world, it should not be seen as a privilege to have a home.

A global housing survey indicated that Irish house prices are unsustainable. While the cost of land is on average 20% of the total cost of house construction in industrial countries, it is 50% in Ireland. The contentious Part V of the Planning and Development Act 2000 stipulates that 20% of residential development sites must be used for social and affordable housing, but many builders pay money instead of delivering housing units. The Building Industry Bulletin of 2002 found that the profit on building land in Ireland was 300% above average profits. The Kenny report recommended a ceiling on the price of land of the existing value of agricultural land plus 25%. Again, however, no action was taken by the Government. Many young people in Ireland face difficulties, yet the Government does not seem to realise that a crisis exists.

Noel Ahern (Dublin North West, Fianna Fail)
Link to this: Individually | In context

This matter, as well as the other comments made on house prices in recent days, arise mainly from a press release by Permanent TSB, the special tenth anniversary edition of the Permanent TSB-ESRI house price index. This has the appearance of a rather contrived piece of publicity, given that the first issue of the index was only published in July 1998, even if it contained backdated figures to 1996. The launch of an affordability index by EBS also generated a lot of publicity, even though the affordability figures turned out to be well within the criteria applied by lending institutions themselves.

It is ironic that an institution such as Permanent TSB is eager to dramatise house price increases. Last year, when I voiced concern about the likely impact on house prices of increased lending and 100% mortgages, Permanent TSB responded by pointing out that the rate of house price growth had been moderating, which was the case until then, and stated that it believed the introduction of 100% mortgages would not have any impact on moderation or in any way contribute to house price inflation. Few now agree with that prediction and statistics do not give any credence to it. In a recent quarterly bulletin, the Central Bank noted that the gradual acceleration in house price inflation since last autumn had coincided with some easing of credit conditions. The bank stated that this seemed, at least in part, to reflect an increased effort on the part of mortgage lenders to market new products, specifically, 100% mortgages.

The Central Bank's comments are helpful and I hope they will promote a more restrained approach than the presentation made by a Permanent TSB representative at a conference earlier this year which proclaimed the merits of 100% mortgages, interest-only mortgages, 40-year mortgage terms, the inclusion of room rental potential in income assessment and, as a more radical solution for the future, the prospect of intergenerational mortgages.

Many financial institutions have hyped up the price of houses over the past year. My belief that it is time for more sanity in the mortgage lending area broadly accords with the sentiments expressed yesterday by the President of the European Central Bank. We could do with much less hype in the housing market and an end to scaremongering about the inability of first-time buyers to gain a foothold in the market. This is important because price expectations have an important influence on the market. A certain amount of damage has been done by hype and overly aggressive marketing. Some people have been stampeded into buying sooner than may be necessary, putting first-time buyers into competition with each other and stretching buyers' borrowing to the limit of what may be prudent.

It would be foolish to ignore the potential implications of excessive lending at individual and macro levels for house prices, which are determined not only by the numbers seeking houses but also by the volume of available funds. While easier credit may seem a panacea for some individuals in the short term, the overall impact on market prices and the long-term implications in terms of personal debt are not likely to be favourable. If things go wrong, the Government can always be blamed. The figures quoted by PTSB do not show the full picture. They are based purely on PTSB's lending and relate to a mixture of new and second hand houses. My Department's statistics, based on returns from all mortgage lending institutions, show that the rate of increase for new houses nationally was a good deal less, 210%. Prices in Dublin have also been skewed by a number of high profile and highly priced new developments, while second-hand prices are often inflated by demand for houses with potential development sites attached, as well as scarcity in highly sought after areas. Typical first-time buyer prices are a good deal lower than the overall average — on average approximately 13% less and lower in some cases. In Deputy Crowe's constituency affordable housing has been put on sale at €142,000 for a two bedroom house and €172,000 for a three bedroom house.

Seán Crowe (Dublin South West, Sinn Fein)
Link to this: Individually | In context

In my constituency one in three houses is rented.

Noel Ahern (Dublin North West, Fianna Fail)
Link to this: Individually | In context

I accept that some people on basic wages are under pressure. For those who cannot afford homes under the affordable homes scheme, the budget for social housing is almost €2 billion. Many affordable homes are available for sale at prices under €200,000. Those who earn €30,000 manage to buy these.

Some of the problem is due to financial institutions shovelling out money and giving too much. If builders and developers see that people get loans for any amount they increase the price. Financial institutions get publicity from press releases that hype the situation and create demand.