During the past week, the Central Bank made noise about implementing rules around minimum deposits and maximum salary multiples for mortgages.
In summary, this is a good thing. If we had this in place 15 years ago, or more to the point, enforced it, it is possible that a lot of people who are in negative equity now would not be, a lot of houses built in places where we don’t need houses would not have been built, 15% of our economy would not have relied on construction, thus skewing employee skillsets, and we would not have had to bail out the banks. So much.
There is screaming and howling about this because of house prices now. House prices in Dublin, in particular. In summary, house prices in Dublin are clinically insane.
When this becomes a problem, what the people of Dublin, and Ireland, do, appears to be to scream at people in charge to find ways of giving housebuyers more money. Sort out affordability.
Sorting out affordability always seems to mean bending the roles to give people more money. It NEVER seems to involve chopping down the cost of housing. The interesting thing is, a lot of the people screaming about this and how will they ever afford their own home don’t appear to have the financial nous to understand that a net impact of a policy like this will be that prices come down. Whereas saving 100KE for your 500KE house might look horrifically impossible from here, if your house collapses in value to something more reasonable like 100KE, all you have to save is 20KE. It’s still a lot of money of course. Simple truth is that if a lot of people suddenly can’t afford extant house prices, house prices are going to come down.
Of course, this means that a lot of people who own houses will shout about their losses.
What it boils down to, however, is a choice between them – and they contributed to the financial collapse here by overpaying for their houses – and the future of the country. Sorry, but that’s how it is.
Discussions around the property market in Ireland have always featured a lot of discussion on blame. Whose fault is this current disaster? A lot of people like to blame the generation older than mine because they benefitted. But they benefitted because many people in my generation lost the run of themselves and over extended themselves. No one was ever forced to do this except by themselves. Simple truth is if people aren’t buying property, property prices will come down, probably slowly as people try to catch falling knives.
I read a rant on the subject this morning which depressed me. Firstly, home is not linked solely to owning property; it’s how you live in it. Secondly, the person writing it seems to think that having a massive debt around her neck was a good thing.
Instead of screaming for more money, the priority should be to reduce the cost of housing. Let me put one example on the table: a two bedroomed apartment in Brussels to rent will set you back somewhere around 900E. It will be far better serviced by helpful things like transport infrastructure and healthcare and commerce and it will not be out in Ashtown or Ratoath which is probably where you’d have to go to pay similar rent in Ireland.
I don’t know how you fix some of the structure problems of property in Ireland: I think you’d need to knock a whole pile of buildings and build properly designed accommodation (not the apartment complexes we’ve built, that’s for sure) and start over. What you don’t do is feed more money into the system. We’ve already had one huge, economy killing fiasco. It would be nice to have learned from the experience.