House prices could increase wage bills

EMPLOYERS will face rocketing wage bills unless the government acts to make housing more affordable, the Small Firms Association (SFA) warned yesterday.

The IBEC-backed small business group said reports of a stabilising housing market were “just an illusion” and that the government needed to help those on low and medium incomes to buy their own homes.

SFA director Pat Delaney said the high cost of housing in Ireland was a “significant barrier” in the labour market and made it harder for employers by pushing up wages and salaries and discouraging people from moving to take up a new job.

“There is an economic, social, cultural and political case for increasing the capacity of people to buy a home,” he said. “The explosion in house prices and sustained increases in rents is driving up the cost of living and exerting pressure on pay demands.”

Mr Delaney called for action to make life easier for first-time buyers by delivering more affordable housing and halting the growth in house prices. “While the level of housing output has increased significantly over the past three years, the position of first-time buyers has improved only marginally and recent reports indicate that 26% of all new houses are being purchased for investment, rather than by first-time buyers,” he said.

He also criticised the level of new local authority housing being made available each year. There were over 60,000 people on housing lists but the number of new local authority houses fell 21% to less than 3,500 last year, he said. “The level of commitment by local authorities to the most pressing problem, in both societal and economic terms, is bewildering given its importance,” he added.

The SFA said the average cost of buying a house had more than doubled between 1999 and 2004, although the cost of building had risen by just 33%. “This points to significant profits being made by people who are drip-feeding land into the building process,” said Mr Delaney. He said there was enough zoned land to build 367,000 new homes but demand was still not being matched by supply. This meant mortgages could only be serviced by two incomes and that 26% of a couple’s combined take-home pay went on meeting their monthly repayment.

“It is a test of our nationhood to provide housing for all citizens. It is a test which we are consistently failing,” said Mr Delaney. “The cost and availability of housing impacts across the economic, social, cultural and political divide.”