Sean Barrett (Independent) | Oireachtas source

I express concern at the report by Fionnan Sheahan in the Irish Independenttoday that loans of up to 95% will be offered to young borrowers for housing. Undoubtedly, this will inflate house prices. This has happened in a similar scheme in the United Kingdom and is something we do not need. The British "help-to-buy" scheme for houses worth up to £800,000 only inflated the market, as reported in Mr. Sheahan's article. One of the key pieces of research, from the Brookings Institution in Washington DC, was entitled, Too Much Capital for Housing. It may seem counter-intuitive, but if supply is inelastic and the amount of finance available is increased, prices will rise. This is a problem we must address. I draw attention to a comment made by Professor Ronan Lyons of TCD during the week. He said construction wages in Ireland were still 25% higher than in Germany. Perhaps this is one of the reasons we have a housing market that is in the state it is in. We have had a recession and consumers now have less money to spend. House prices should fall even more, which is the way we can solve the problem. The Government is studying the issue, but we must be aware that the last time builders and bankers got together, they did serious damage to the country. In Mr. Sheahan's article a statement attributed to a Government spokesperson indicates that the banks are offering 90% mortgages, but that the business is capital intensive for the banks. It is, but freeing capital into the housing market will push up prices. The evidence is that a 20% deposit and a maximum loan of approximately two and a half times one's income are required to have stability in the housing market. The danger is we could start all over again the same cycle that resulted in so much damage being caused the last time.