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A stable housing market – How do we get there?
By Ruth Baily
Karl Deeter, writing in the Irish Times has been looking at the history of Irish housing cycles for the past three hundred years. Having looked at all of the data he has come to the conclusion that the only way to solve the current and long term housing issues is with supply. Looking at data collected since 1708, when records began, he and a colleague have recognised a pattern of boom and bust that has been part of the Irish housing landscape for those three hundred years.
He points out that it is not necessary for there to be an excess of credit available to drive a property bubble, mortgages, after all, have only been widely available to the majority for a brief period of those three hundred years. Other factors can drive up prices. Cash buyers, foreign investors and Real Estate Investment Funds (REITs) are all pushing prices upwards. By constraining supply the conditions to create a bubble are being created.
Deeter says, “Ireland’s approach to property has been so poor, you would have to wonder whether it is a result of intent or incompetence that we find ourselves victims of a massive housing shortage just after one of the world’s largest property crashes in which oversupply played such a key role”.
He also suggests that development levies and Part V should be scrapped as these costs are borne by the end buyer, “About 40 per cent of the price of a new home is taxes; it’s an exchequer’s dream product, but the tax man’s dream is a nightmare for new entrants, who must bear the higher costs over their working lives. Policy-makers should scrap every house-building-related tax they can.
The Government even managed to outsource its social housing costs on to the same home buyers in the form of the Part V contribution – effectively a 20 per cent tax on development – creating more cost in housing, which is then passed on”.
Both development levies and Part V are major barriers to progress at the moment. Development levies are currently pegged at boom time levels and need to be recalibrated to reflect the current economic climate, while Part V is being looked at. Until both of these issues are resolved there will be no great upsurge in supply.
The ESRI has said that we need 90,000 new homes in the next five years with 60,000 of those in the greater Dublin area to keep up with the demand of our growing population. Only by ensuring a continuing steady supply for all sections of the market will have a properly function property market and this in turn will put an end to boom and bust. The government must ensure the right conditions exist to allow this to happen.