Taoiseach downplays property bubble fears
Unveiling the €200m initiative with Tánaiste Eamon Gilmore, Mr Kenny signalled help was on the way for first-time buyers with a mortgage insurance scheme.
The 75-point programme aims to create 60,000 construction jobs by 2020 by tripling current levels of building to 25,000 units a year. But opposition parties dismissed it an as election ploy “cobbled together” the week before crunch local and European elections.
Sinn Féin leader Gerry Adams said the initiative looked like “an extract from the election stunt section of the Fianna Fáil handbook of strokes and other scams”.
“It doesn’t make any sense at all in dealing with the housing crisis,” Mr Adams told the Dáil.
Finance Minister Michael Noonan has signalled State help for first-time buyers by guaranteeing a portion of mortgages in a bid to encourage banks to lend.
“It is very difficult to envisage a young couple having more than 10% of the price of a house as a deposit,” said Mr Noonan.
“At present, they are being required to come up with something like 20%.
“So we are examining it. It would be only for new houses, not for the second- hand market, and it would be for first-time buyers. It would be temporary in nature. But, in principle, we think it is a good idea as a supply side initiative.”
However, leading economist Colm McCarthy said the idea had echoes of the 100% mortgage era which precipitated the crash. He said the Government could end up with the “taxpayer on the hook” for part of the deposit on a 95% mortgage.
“Until 15 or 20 years ago people were expected to save up 15% or 20% of the purchase price and then take out a mortgage for the balance. Going back to this idea that you don’t need any money down, or you need very little money to put down, seems to me to be revisiting the errors of the recent past,” he told RTÉ.
Reform Alliance TD Lucinda Creighton also expressed concern, saying: “Creating further demand and fuelling demand and, essentially, pitching first- time buyers against each other is not the way to deal with that supply issue.”
Mr Gilmore dismissed the fears, saying that the only thing worse than a property bubble, was a burst property bubble.
Launching the initiative in the Dublin West Dáil constituency which holds a by election next week, Mr Kenny denied it was a campaign stunt as he attacked the “outrageous cheek” of Fianna Fáil after the party presided over the collapses in the housing market.
The stimulus plan also proposes a new task force to concentrate on the situation in Dublin, changes to planning and regulation frameworks, and a greater role for Nama is helping boost the supply of properties.
The €200m initiative includes €50m earmarked for local road projects, and €50m for social housing help.
Last year, 8,301 housing units were completed, that was a fall of 91% on the built in 2006.
Q. How will first-time buyers be helped?
A. The Government is considering a mortgage insurance scheme based on British and Canadian models whereby the State shares part of the risk taken on by buyers in order to encourage banks to lend to more people. However, critics warn allowing people to need only 5% mortgage deposits could leave taxpayers liable for debts if they fail to make payments.
Q. How will housing output be tripled to 25,000 units a year by 2020?
A. A range of measures will include changes to planning rules which will let councils fast-track developments on empty sites, a special task force for the Dublin market situation, and changes to building regulations.
Q. What financial incentives will be put in place for developers?
A. Providing equity for developers from the new strategic investment fund; an overhaul of the tax code for the building sector; and a greater role for Nama.
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