Changes in the Mortgage Rules Without an Increase in Supply Will Push Up House Prices Further
Following a briefing for TDs by the Central Bank today on the changes to Mortgage Rules for first time buyers, Aontú Leader and Finance Committee member Peadar Tóibín TD has stated;
“Supply in houses has been extremely rigid over the last 6 years. The lack of supply and the increase in demand has pushed up the cost housing significantly. The big weakness in the government’s policy has been not being able to fix the dysfunction in the supply side. Its clear that costs are going through the roof and are hindering supply. Changing the Loan to Income rules for First Time Buyers without fixing the supply problems will just increase the price of homes. This means that families will carry increased debt over their lives. This is obviously not good at any time but is worse at time that interest rates are taking of”.
“The Central Bank stated in response to a question that I asked, that this change in policy may lead to moderate increases in the price of homes. However they did not give details as to what this means in euro terms. They also stated that the rule change is not a tool to stimulate supply of housing. However higher prices may increase supply making supply more profitable. If this is the goal, the government could achieve the same objective by reducing the massive amount of tax that is imposed on house building. Up to 25% of the price of a home can be taxes or government charges”.
Aontú believes that given the change in the Central Bank rules and the worsening Housing Crisis, the government must act now on fixing supply and the affordability of homes. The most direct influence the government has is taxation and levies. Yet instead of lowering taxation and levies on homes the government are actually increasing these costs. Proceeding down this route will see families with greater debt for the same homes as before”.