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Heading for another property crisis

Hook in the west

Hook in the West
George Hook

IF I was living my life over, in my mid-thirties, in November 2016, there is a good chance that I would be homeless. That’s not an exaggeration. Sometimes I wonder how I would have survived, had my circumstances back then been transported to the present day.
If I’m in an optimistic mood, I convince myself that I would have found a way to get through it all, just as I did back then. But, on a practical day, I struggle with the grim reality that I might not have found a solution. Life in Ireland today is very different to the one that I lived through during the bleakest years of my life.
One of the few decent decisions I made during my late twenties was to buy - and pay for - the house that I still call home to this day. Young house-hunters nowadays might baulk at the notion of forking out the measly sum of £5,000 for a four-bed, semi-detached house in Foxrock, but in 1969, 5,000 punts was a lot of money and house prices weren’t nearly as crazy as they are today.
When I was at my lowest ebb financially, with creditors chasing me all over Dublin, I was thankful that, in spite of everything, I had a home to call my own. It probably saved my life.
The single biggest obstacle to owning a home in the ‘70’s and ‘80’s in Ireland was the process of qualifying for a mortgage. Irish banks revelled in making would-be house buyers jump through hoops to secure a loan at an extortionate rate of interest. Many of my friends had to come up with a 50 percent deposit on the value of a house, before securing a mortgage at an interest rate of 18 percent!
While these stringent lending practices meant many married couples struggled to save for a deposit, it also meant that house prices were relatively affordable. The banks would only lend on a single salary, even if both partners in the marriage were working, and the mortgage was given on a maximum capacity of two-and-a-half times that single salary.
These conditions meant that there wasn’t the type of massive housing boom that currently exists across the country today.

Rent market
The race for houses in 2016 has reached crisis level, particularly in Dublin. The building market remains slow and unable to keep up with demand and while construction on new houses has improved from two or three years ago, it is still wholly insufficient to cater for the needs of a growing city population.
Every week, across Dublin, thousands of people - mostly couples with young families - queue up to view houses on the market. Estate agents continue to play people off against each other to push up the already extortionate price levels and with stricter lending practices from the banks than was the case during the last property bubble, most couples cannot go over their fixed mortgage offer.
Renting has become a nightmare with tenants across the capital forced to shell out exorbitant sums each month just to keep a roof over their heads. Landlords don’t want to hear about individual struggles; the market is so saturated with would-be tenants that there is no problem filling a vacancy within days. If a renter runs into bad times, they’re turfed out on their ear without so much as a second glance.
Renting is now seen by many as wasted cash. The price of a two bedroom apartment in Dublin has risen to farcical levels and tenants can expect to pay anywhere between €1,500 to €2,000 a month. With interest rates on a mortgage still very favourable is it any wonder people are choosing to try and buy a house, when any monthly mortgage repayment would be considerably lower than a monthly rent?
The housing situation, as it stands, is almost a perfect storm of over-demand, under-supply, extortionate rent levels and no clear plan by the government to level the playing field. Last week I listened to a young, single mother speak about the torment of living in a hotel room with her three year-old daughter because her previous rented accommodation in Swords was repossessed and she was turfed out on the street.
Her family home is already over-crowded with her brother and sister and their families living on top of her mother, so she had no option but to go to a hotel. She has no facility to cook meals or even keep milk cold for her daughter. Every house she has applied for only accepts professionals on a full-time salary. Her’s is a hopeless situation with seemingly no end in sight. I am convinced that I would be in a similar peril if I was re-living my youth in the current climate.

Action needed
The government needs to tackle this situation urgently. Certainly, we do not need a repeat of the Celtic Tiger years, where banks lent out mortgages at the drop of a hat, fuelling high house prices and creating an unsustainable bubble. Last week’s move by the Central Bank to ease lending rules to first time buyers might be a positive step to help couples get on the property ladder, but there is no guarantee that it won’t result in a rapid increase in house prices.
It is difficult to see a solution, but the government must find a way to get more houses on the market for people that need homes. The current rent levels make house prices an attractive option for would-be landlords, but the last thing Ireland needs is more landlords at the expense of young people buying a home. The only way rents will ease off is if the supply of rental properties increases. But do we want more buy-to-let landlords? It is the very definition of a catch-22.
I wish I had the solution, but this issue needs urgent attention from our best and brightest. I am just thankful that I am not one of the statistics on the ever increasing homeless list. If I was living my life all over again now, I am fairly certain that I would be.