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Comment: Relaxing deposit rules just not an option, even if it means families must save up €83,000

We threw it away. Measures introduced two-and-a-half years ago by the Central Bank to curb runaway property inflation were only ever a temporary stop-gap. The aim was to control prices to buy time to enable the State to fast-track housing development in a market which is now seeing the worst supply levels in a lifetime. It was plenty of time.
Two-and-a-half years should have been more than enough to enable something to be done by Government to increase housing stock and head off another bubble.
But despite the release of one housing plan after another in the interim, this has quite plainly not happened – even despite the considerable breather bought on our behalf to amend the problem.

Now the pressure caused by ever-tighter supply combined with newly moneyed buyers has seen prices inching up to levels which are once again heated and within the realms of those experienced in the Celtic Tiger years. More worrying is that today inflation is running high, but also with the “handbrake” of those lending restrictions largely still applied.
We have artificially put the brakes on prices by seeking deposits of 20pc rather than a more normal 10pc, and now the latest Irish Independent/REA survey shows that price increases are back up to boom-era speed with those measures largely still in place. Relaxing that 20pc deposit rate is just not an option now, even if it means that average Dublin buyers are now facing a completely unmanageable cash down payment of €83,000 if they want to buy the most average three-bed semi in the capital – now priced at €414,500. What young family can save €83,000?

For a long time, Dublin was the main concern. Before the Central Bank applied its lending restrictions at the beginning of 2015, the capital was seeing prices increasing at a rate of almost 20pc.

Today’s REA survey shows Dublin price increases now running at 14pc per annum for average homes.
Stock in Dublin has this year diminished to a tenth of what it should be in a “normal” market.

Around a half percent of total stock is now for sale where the norm should be about 5pc.
New homes, which have historically provided around one-third of all homes sold, are still languishing at miserable launch levels with developers unable to get affordable finance or dealing with sites for which there is no infrastructure in place.

But now many regional counties have become the focus of even higher rates of price inflation. At the current rate of three-monthly inflation in Longford (8pc), homes will have increased in value by more than one-third over a 12-month period. This is unprecedented.
With almost no new estate homes built in regional towns through the past 10 years, nor likely to be built until second-hand prices rise above the cost of building new homes, the buyers who are out there are chasing a very tiny pool of properties and competing hard for them.

The same is true in counties such as Laois (values up 7pc in three months) and Westmeath (up 6.3pc).

Following the recent departure of our housing minister Simon Coveney, the new incumbent Eoghan Murphy has already been talking of taking his suggestions for newer “emergency” measures to the Department of Finance and to discuss them with the Attorney General.
It’s two-and-a-half years too late. It was late even two-and-a-half years ago.
But better very late than never.

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