Pádraic McCormack (Galway West, Fine Gael)
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Question 112: To ask the Minister for the Environment, Heritage and Local Government his views on the imbalance between Dublin and the rest of the country identified in the EBS-DKM affordability index published on 28 September 2006 that shows that while first-time buyer couples nationally are spending up to 25% of their joint disposable income on mortgage repayments, working couples in Dublin are spending up to 37% of their income on mortgage payments; and if he will make a statement on the matter. [31195/06]

Noel Ahern (Dublin North West, Fianna Fail)
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Increasing house prices and mortgage interest rates mean that a greater proportion of disposable income is now needed to meet mortgage payments. Despite this affordability both nationally and in Dublin remains within the affordability limits now typically applied by lending institutions in deciding mortgage applications.

My Department's affordability index reflects the position at the end of March this year for a couple on a combined income of just under €76,000, based on the average industrial and non-industrial wage. The mortgage outgoings of such a couple represent about 29% of their disposable income. This ratio would in fact be lower if account is taken of the longer loan periods which are now on offer from the lending institutions.

The Government has taken a wide range of actions to maximise access to home ownership. The success of these is demonstrated by the fact that over 45% of new house loans last year were taken out by first-time buyers. First-time buyers pay at least 13% below the average price for a new house and significantly less for second-hand houses. Some 90% of the houses bought by first-time buyers cost less than €350,000 nationally and 75% cost less than €350,000 in the Dublin area. The availability of new financial products such as longer-term mortgages has also assisted in keeping mortgage repayments relatively affordable.

A key feature of the Government's housing policy is to promote an adequate supply of housing to meet demand. 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 the period. Last year 81,000 houses were built and the figure this year will be higher again — the current rate is 20% up on last year.

A number of measures to assist those who cannot access affordable housing without assistance have been put in place. These include the shared ownership scheme, the affordable housing scheme and affordable housing under Part V of the Planning and Development Acts. Eligibility and subsidy levels under the various schemes were increased in January.

Pádraic McCormack (Galway West, Fine Gael)
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I presume the Minister of State does not believe the script he has just read. He would not want to be influenced by what lending institutions might give because they have their own agenda. Is the Minister of State aware of another report published in the past month, which shows that key public workers, including gardaí, teachers and nurses, are being priced out of the housing market in four of the five largest cities in the State, Dublin, Cork, Galway and Waterford? I ask the Minister of State to consider establishing a special unit in his Department to deal solely with this issue and not to read out the irrelevant details he has just given us.

That unit should tackle changing the stamp duty regime whereby first-time buyers buying houses costing more than €317,500 are subject to the full amount of stamp duty on the houses. This adds considerably to the dilemma and hardship of first-time buyers. Between all charges, those buyers are paying the Government up to 50% of the cost of the house. Stamp duty alone adds from €20,000 to €40,000 to the price of a house for a first-time buyer. Does the Minister of State agree with the Tánaiste, who believes that the Government no longer wants the €2 billion it raises from stamp duty? Would he consider abolishing stamp duty for first-time buyers in accordance with the Fine Gael policy?

Noel Ahern (Dublin North West, Fianna Fail)
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Many studies have been carried out by different financial institutions. However, first-time buyers are key buyers in the market. As I said, 45% of mortgages for new homes taken out last year were by first-time buyers, which shows they are buying. Different people can play around with figures. The survey by Halifax mentioned by the Deputy was very selective in its prices. It used the average price of all houses, which includes big second-hand houses that might have development land adjacent. It used particular salary levels — in the case of a nurse it used the salary in her first or second year. It is possible to play around with figures to get the maximum effect. However, first-time buyers represent a very large proportion of the market. Some 45% of new houses are bought by first-time buyers. The average house that a first-time buyer buys costs 13% less than the average new house bought by others, mainly people trading up. Relating what the first-time buyer pays for a house to the average price of a second-hand house is irrelevant, because we all know that second-hand houses include many fancy houses in the leafier parts of the city and elsewhere.

On affordability, house prices have increased in recent years.

Eamon Gilmore (Dún Laoghaire, Labour)
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Really.

Noel Ahern (Dublin North West, Fianna Fail)
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The affordability index is more important. While that has also increased it is still not as bad as it was for a period in the early 1990s. Affordability comprises the price of the house, the tax rate, the interest rate and the average take-home pay. While affordability has worsened, many people have got over it. While, sadly, I might give out about it, many affordability indexes are based on either a 20-year loan or, in some cases, including that of DKM, a 25-year loan. In reality people are now getting 35-year mortgages, which considerably decreases the percentage of the net take-home pay spent on mortgage repayments.

Pádraic McCormack (Galway West, Fine Gael)
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The Minister of State said that 45% of mortgages are taken out by first-time buyers. While that may be a fact, and I take his word for it, they are taken out to buy houses on which the Government is charging those first-time buyers stamp duty. How many people in that 45% are buying houses costing more than €317,500? While I do not know if the Minister of State has such experience, I have experience of this because my daughter is a nurse in Dublin trying to buy her first house. As she cannot get a house for less than €317,500, she will be obliged to pay the Government €40,000 or €50,000 for buying the house in the vicinity of where she works or on the outskirts of the city.

Is the Minister of State aware that the recent census showed that the population of Dublin city rose by only 2% between 2002 and 2006? However, there was a huge growth in the neighbouring counties of Fingal with a 22% increase, Meath with a 21% increase and Kildare with a 14% increase. This clearly shows that first-time buyers must go considerably outside the city and away from where they originate and work to acquire a house at a reasonable price. If the Government increased the threshold for stamp duty or abolished it altogether for first-time buyers it would be doing the first-time buyers a service rather than paying lip service. Of course it is true to say that first-time buyers are buying houses for 13% less than the average person because he is comparing them with people who have traded up. In any case most first-time buyers buy flats or apartments.

Noel Ahern (Dublin North West, Fianna Fail)
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The stamp duty rates are set by the Department of Finance and there is no point in us going into that. Generally speaking first-time buyers are more inclined to buy new homes than to buy second-hand ones. When we reduced the rates two years ago it shifted the balance and brought a far greater number of first-time buyers into the second-hand market.

Pádraic McCormack (Galway West, Fine Gael)
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What is wrong with that?

Noel Ahern (Dublin North West, Fianna Fail)
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There is nothing wrong with that. Generally first-time buyers buy new houses rather than second-hand houses. The Deputy mentioned the census figures. There are four local authorities in County Dublin. Dublin city is almost fully built up. Naturally the population of the city will not increase in the same way as Kildare, Meath or north County Dublin. It goes back to the point Deputy O'Dowd made earlier. Some of the middle-class, middle-range suburbs of Dublin now have many three and four-bedroom homes containing only two adults. In a large swathe of Dublin, in areas such as Clontarf, Glasnevin, Rathmines and Clonskeagh, the populations are falling. There is a logic to Deputy O'Dowd's remark that it would be sensible to recycle some of those homes but the opportunity for building new homes in Dublin does not exist other than in the docklands, Pelletstown and other such places. While affordability has worsened slightly, the fact that people are now taking out 35 year mortgages means the percentage of net take home pay being spent on mortgage repayments is no greater than it was when the Deputies opposite or I bought our houses.