27th October 2000
THERE are a small number of beneficiaries in the house price boom, mainly investors and landowners. The rest of us appear better off on paper.
In my own case the house we bought in 1994 has almost tripled in value, the selling price is now in the region of £150,000. So, wippee, I’m loaded.
OK, so I sell the house. And live where?
That four bedroom house that I couldn’t possibly afford in 1994 was only ten grand dearer than our own house. Now the differential is 30 grand. I’m stuck.
Unless I move to North Leitrim the gain in wealth is entirely illusory.
And I’m one of the lucky ones. First time buyers now face a mountain to climb. Evidence from the building societies point to the fact that parents are dipping deeply into their own pockets in order to get their children onto the housing ladder.
Every time the annual house price increase of 25% is announced, panic grips the middle classes. Instead of the price increase dissuading bids, the prospect of houses being less affordable next year actually fuels the demand.
Therefore those with collateral buy the house.
Those who would have wanted to buy (and who actually need to live in the house) are outpriced and move into private rental accommodation, increasing rents in that sector.
The increased rents attract investors and overcome the fiscal actions the Government has taken to keep investors out of the market.
It’s a very vicious circle and the poorest in society, of course, come off worst out of it.
The Government has been dashing about like headless chickens without any sort of coherent policy to speak of.
The policy they need to address is about house prices. The Government needs to announce that they are committed to reducing the price of houses to around four times the average wage in this country. This is in the order of £70,000 to £80,000.
This policy would send a strong signal to the market that long-term speculative demand will not be rewarded. It would put housing policy on a proper footing – that is, the primary purpose of housing is for people to live in rather than some sort of money game.
Is such a policy realistic?
Well, a modern three bedroom semi in an estate costs about £60,000 per unit to build.
When it gets to the market it costs £150,000. The difference is made up of the land cost, builder’s profit and selling costs. A huge proportion is land value. New housing could be built on specially zoned land, with the landowner given reasonable (as opposed to the current extortionate) compensation.
There would be losers. Anyone who has bought a house in the last few years would be left with negative equity.
But if house prices are not reduced, many, many more people long into the future will pay the price.
Perhaps it’s too much to ask the Government to think this far ahead.
There is a quicker way to puncture the house price bubble, especially in Dublin. Provide accommodation for college students.
There are tens of thousands of students in Dublin, a large proportion of which have been traditionally fodder for the private rental sector.
It would be relatively easy to build apartment blocks to house students on campuses throughout Dublin.
For example, DCU students could have high density accommodation built in the redevelopment land around Ballymun. Student nurses could be housed in the massive Grangegorman lands.
The accommodation can be pretty basic as students are a transitory lot and can put up with more cramped living space than the rest of us.
Something in the order of ten thousand places could be provided within a matter of two years. It would make a major dent in the demand for rented accommodation, thus reducing investor and panic demand for housing.
|As well as that…|
The column that never was
I HAD intended writing about the Mary Ellen Synon controversy but given the deadline I was unable to get the full text of her piece.
I was confident that the article would be on the Sunday Independent website. But there’s not a trace of it there.
A bloke in the Sunday Independent newsroom told me rather primly that not all the paper is put on the website and this article, ahem, hadn’t been chosen.
Who am I to say different? But the website is pretty comprehensive and yet the most talked-about article of the year isn’t on it.
I have to say Aengus, it looks like censorship. (I said looks like, Aengus. Put that lawyer back on his leash).
The upshot is that I haven’t read the article so I can’t really comment on it. If some people had their way that article wouldn’t have been published at all.
In that case I would have to depend on someone else’s second-hand reading to be outraged.
And that’s the problem with censorship. Because the people who read that article before me were outraged, I can’t get to read it.
So Aengus, you should have stuck with your ‘publish and be damned’ line and not have worried about the advertising being withdrawn.