Housing double standard leaves buyers at risk

BY ROBBIE SMYTH

Another week in the housing market and more bad news, not just for home buyers but for owners too. 26-County local authorities are proposing new planning levies, fuelling house prices even further as griping house builders get ready to pass on the increased costs to buyers, even though new figures on builders' profits show huge takings over the last year.

Homeowners' fears will be raised after the Central Bank concluded that house prices are inflated and there could be a crash in coming years.

The Central Bank has followed on the heels of the Economist magazine, the ICTU, and many political parties, including Sinn Féin (except Fianna Fail and the Progressive Democrats). All have raised concerns that not only are ongoing years of price increases causing a housing crisis, but there is also the serious threat of a collapse in prices, leaving hundreds of thousands of Irish families saddled with huge debt for assets that might not be worth the money borrowed to pay for them.

HOUSES OVERVALUED

So what did the Central Bank say? Well, in their own strange sort of financial speak, the bank's commentary says that the ongoing rise in house prices could be followed by a "quite disruptive adjustment as prices revert to their fundamental values". Simply put, it means that houses' worth are overvalued and prices could fall.

The Central Bank report dominated news bulletins last weekend, showing another negative feature of modern Irish society. It shows that the important thing to getting your voice heard in the Irish media today is credentials. More importantly, you need "expert credentials". It seems we can believe the Central Bank but not a myriad of other important voices.

The Central Bank was short on solutions to the price conundrum, which shouldn't come as a surprise. For years, they have shown themselves being completely powerless when it came to halting the banks they are supposed to be regulating from giving buyers loans way beyond the banks' own restrictions of not borrowing more than three times your annual income.

BUILDING LEVIES

The bad news does not end there; local authorities are planning new levies on property developers. For example, Fingal County Council, where there is zoning for more than 50,000 homes, is proposing to levy developers €140 per square metre of floor space. It would mean a levy of €11,480 for an average sized home in the council area.

The Irish Home Builders Association (IHBA) believe that the levy will mean a 5% increase in house prices, showing that they have no intention of recommending that their members absorb the increase.

The IHBA don't seem to think that any of their members should pay this tax, which could be used to fund local authority house building or other local development projects. Sinn Féin TD and spokesperson on housing, Arthur Morgan, told An Phoblacht that "the developers could easily afford to absorb this levy, given that the recent Building Industry Bulletin showed that profits of builders in Ireland were billions of euro above the EU average". The Bulletin estimates that €300 million in excess profits were made in the Fingal council area alone last year.

DEVELOPERS' PROFITS

The Bulletin's figures are reinforced by profit figures for some Irish builders. One company, Menolly Homes, recorded a 170% increase in pre-tax profits totalling €27 million for the 12 months to September. €27 million was also the figure recorded by Albany/Trident homes. A range of other building companies were also recording profits in the tens of millions for the last year, showing that they do have the capacity to pay these levies without raising prices for buyers.

This week in Leinster House, deputies are debating a private members' bill on capping the price of housing land, which will have the support of Sinn Féin, Labour and the Greens. In recent months and weeks, both the Fianna Fáil leader Bertie Ahern and his brother Noel, who is minister for housing, have indicated support for such a measure. Yet it is clear that for the foreseeable future nothing will happen.

It seems that, in common with many other aspects of government, there is a glaring double standard at work. Homeowners and new buyers are left to cope with massive mortgages, paying higher prices while the builders and developers profit because of the Fianna Fáil politics of stalling and indecision.