Real Estate Alliance's call for Central Bank mortgage rules review likely to fall on deaf ears

Calls from one of the country’s leading estate agency groups for the Central Bank’s mortgage rules to be revisited are likely to fall on deaf ears after the finance minister signalled his support for the lending restrictions.

Finance Minister Michael Noonan ruled out a full review of the restrictions until the beginning of next year at the earliest and claimed that prior to their introduction “it looked a bit scary” that another property bubble could have been emerging.

Mr Noonan’s comments are the latest show of support for the rules after the Central Bank itself said earlier this week that they are “functioning as intended”.

Central Bank deputy governor Stefan Gerlach described the lending restrictions which require home buyers to stump up a 20% deposit, or 10% for first-time buyers, as “an essential part” of the tools available to policymakers seeking to maintain financial stability.

The minister’s endorsement is likely to come as a blow to Real Estate Alliance (REA) which yesterday called for them to be overhauled.

Among the changes the group is looking to see are an increase in exemption limits for first-time buyers and a broadening of the current exemptions to include those looking to buy their second home.

Currently, first-time buyers are required to provide a 10% deposit on the first €220,000 of the cost of their property and 20% above this cut off point.

REA wants this limit increased by €90,000.

Chairman of the representative body, Michael O’Connor said the changes are being sought to make starter homes more affordable and allow homeowners move up the property ladder which in turn would free up cheaper properties for first-time buyers.

“We propose that the price ceiling for first-time buyers should be extended to €330,000, in line with the average values in Dublin and secondly, second-time buyers should be assisted by allowing them to borrow 90% up to €220,000 as the current requirements are too prohibitive,” said Mr O’Connor.

“Either of our two options will provide stimulus to allow the market to function, but together, they will provide a sensible solution to solving what is a nationwide housing crisis.”

The body has also recommended expanding the local development levy rebate scheme announced by the Government last week.

“Although the Taoiseach has confirmed that the Government will introduce a local development charge rebate scheme for large housing projects in Dublin and Cork, they are failing to recognise the fundamental supply issues that exist in urban areas nationwide,” said Mr O’Connor.

“The cause of this nationwide lack of suitable housing supply, especially in three-bedroomed semi-detached homes, is that builders cannot yet sell at a profit.

"The average price of a three-bed semi in our Q3 survey was €188,102, and in simple terms, a builder needs to achieve €200,000 from the sale of a new home to cover the cost of construction.

“There is still a huge gap in the cost of building and bringing a house to the point of sale, and what it can achieve on the open market.

"Unless that is closed, we will continue to have a national housing crisis in the short term.”

REA is also calling on the Government to abolish the 13.5% VAT rate on new homes.