David Norris (Independent)

I think he will be cut down to three minutes. We have to keep the Shinners in their place.

This shows lamentable signs of turning into a fairly dreary debate. One of the reasons is that we are losing sight of the human issue and that housing is the single biggest expenditure for young people, either single or married. Previous speakers referred to affordable housing. Where is it? What is affordable? We are now in this range where people are expected to have a joint income of approximately €75,000 to qualify for affordable housing. The situation has become bizarre.

I would like to put a pointer down to the Minister of State on the issue of affordable housing. I know about it because two people close to me were involved. One of them managed to get a house. My partner, who is a nurse, is in the scheme. People are never told when a draw is happening or the result. Let us have a bit of honesty and openness. Why do we not know this? Why do people who have gone to the trouble of filling out and submitting forms not know when a draw takes place so that they know whether they have a house or whether they should look on the open market? One of the problems is that the margin between so-called affordable housing and the open market is narrowing. That is a very worrying trend, as is the fact this Government and its predecessor have allowed the building speculators to get away with murder and to buy their way out of the commitments given in respect of affordable housing. That is a pretty disgraceful attitude.

The root issue is the price of houses. I am now getting on in years. I am 63 years old and the first house I bought was €3,500, and it was a bloody good house. It was a four bedroom house in a nice suburb of Dublin. I am astonished by the situation now. It has all the hallmarks of a South Sea bubble and I have seen it going up and up. I can assure Members that what goes up must come down. I have no doubt whatever that there will be a fall. Government intervention is necessary to ensure as many people as possible have a reasonably soft landing.

I blame the banks, which have gone out of their way to push loans on unsuspecting young people. Their advertisements are a disgrace. I have raised this issue before and would like the Minister of State to take it up in the context of broadcasting and the way they push advertisements for loans, money and this, that and the other. The health warnings are gabbled at a rate which makes them not understandable by the ordinary person. They are almost entirely inaudible. Those messages carry warnings because I have listened to them very carefully. As they are required to do so, they say one may actually lose one's house. I do not know if other Senators have referred to it but we are now in a situation where there is a queue in the courts in the city for repossessions by the banks. The irresponsibility of the banks is further underlined by a series of occasions where solicitors have made multiple borrowings on the same property. Tens of millions of euro have been lost because the banks and other financial institutions were so greedy they could not even wait to check the bona fides of people.

In the past week or two, there was a very worrying report from Standard & Poor's which highlighted the risk to economic growth posed by vulnerable construction and property sectors in several European countries. The worst two countries were Spain and Ireland. It pointed out the risk of a much deeper deterioration in the property market as being quite high in Ireland. It suggested that it could push the economic indictors down to a 1% growth target for the year, which is very worrying. That was picked up by Garret FitzGerald a distinguished economic commentator and former Taoiseach. He concurs with this figure and that our growth could be cut to 1% if the downturn develops on a scale similar to that following the housing collapse in Britain where there was negative equity. The same thing happened in Germany as part of the economic impact of reunification.

I refer to an interesting paper produced by Professor Morgan Kelly of the economics department of University College Dublin. The nub of his thesis is that, "looking at house price cycles across the OECD since 1970, we find a strong relationship between the size of the initial rise in price and its subsequent fall". That should be of concern to us because we have just had an enormous boom. If the fall is comparable, we may well be in difficulty.

Professor Kelly continues:

Were this relationship to hold for Ireland, it would predict falls of real house prices of 40 to 60 per cent over a period of 8 to 9 years. House price falls tend not to have serious macroeconomic consequences, but the unusually large size of the Irish house building industry suggests that any significant house price fall that does occur could impose a difficult adjustment on the economy.

He is taking a fairly positive view in suggesting that there is not necessarily an immediate and direct correlation between any house price collapse and the macroeconomic situation.

Professor Kelly believes that the economy's undue reliance on the building sector could make things difficult. He cites examples of international crises, mentioning that "the real price of Dutch houses fell by 50 per cent between 1979 and 1987, while the price of houses in Britain relative to real income also fell by 50 per cent between 1948 and 1957". He concludes that, "internationally, house prices boom and crash frequently, as economic theory predicts they should".

Professor Kelly then asks what triggers a house price collapse, which is a question the Minister of State has presumed to answer. The Minister of State has argued that we will be cushioned by the strength of other economic sectors. Professor Kelly mentions the damaging effect of being able to rent a house for less than the interest cost of a mortgage, for example. He also cites sentiment as a crucial factor. People get out of the market when they get fed up with it.