Financial Resolution No. 2: Refunds of Appropriate Tax to First Time Buyers 14.10.14
Posted on January 28, 2015 by admin
Tuesday, 14 October 2014
|Dáil Éireann Debate
Tuesday, 14 October 2014
|Dáil Éireann Debate
| (Speaker Continuing)
[Deputy Ruth Coppinger: ] It is clear the Government is delighted that mansions on Ailesbury Road are rising in price, that prices of houses in wealthier areas are increasing , that people at the top see their negative equity reducing and that banks will now be able to reduce their balance sheet losses. These are the facts that the Minister, Deputy Noonan, said indicated a recovery. Meanwhile, people at the bottom and in the middle have no hope of finding a home and nothing done in today’s budget will change that.
Deputy Tom Barry: I welcome the discussion on this resolution as it is a welcome measure. Simply, it offers full relief on tax on the savings of people who want to buy a new house and as it will run until 2017, it removes pressure from people and allows them time to look for a house. There has been some criticism in regard to the 20% deposit required from house buyers, but that measure brings equity to house purchase, makes people more resilient against interest fluctuations and makes them less likely to be unable to pay their mortgages.
The benefit of less financial pressure is underestimated. Most of us have seen people who signed up for mortgages in the past under desperate pressure. The 20% measure will slow down reckless bidding, reduce the possibility of future negative equity and any restructuring required in the future will not be as bad as it would have been otherwise. A short-term sacrifice now will lead to longer-term insurance. Policy in this area creates an environment where people can work. I take issue with the Member who said earlier that a 4.5% interest rate is extortionate. In 1996 when I got my first mortgage, it was at an interest rate of 7.7% for the first five years and we were glad to get that. One can now fix one’s interest rate for ten years for a small amount of money, which provides certainty in regard to repayments.
The Member said that as a result of this new measure, interest rates will increase and that rates should be fixed now at a low rate. An interest rate of 4% is a very low interest rate. I have been in business for 20 years and know that if one had a rate of 4% across the board for that time, that would give a good result.
I would much prefer to have a lower principal and higher interest rate than to have it the other way round. The suggestion has been made that property investors are doing well, but property investors have been losing money for the past decade and are still losing money, because the amounts they are receiving for their properties is less than what they owe to the banks. Therefore, they should not be criticised in that regard.
One would be forgiven tonight for thinking that this is just a Dáil for Dublin. I feel I represent the whole country, but there has been no mention of the other counties. Housing is as important an issue in Cork and Donegal as it is in Dublin.
Deputy Tom Barry: Rural Ireland will also benefit from this budget. Stimulus such as income averaging for farms for three to five years is significant and is also available to farmers who derive off-farm income from on-farm activities or diversification. We aim for an employment figure of 2 million and this will help significantly.
People who seek to criticise a stimulus that will help people buy houses are scraping the bottom of the barrel. One improvement I would seek in regard to this measure is for the discussion to be moved further in terms of the definition of a first-time buyer. In many situations people buy a house jointly initially and then singly. We need to discuss this issue because many elderly men and women are on their own and find they need to buy a house later on in life. We should try to help these people also.
Deputy Billy Timmins: I welcome this proposal, but I am always a little wary and suspicious of measures that are introduced to counteract negative publicity. Therefore, while I welcome this measure, I feel it has been introduced to counteract the negative publicity in regard to the Central Bank’s proposed new lending guidelines. The same is true in regard to the measures introduced in the budget today to deal with the water charge crisis, once again a response to negative publicity. This is not a significant measure and just tips the cap to the housing issue. Deputy Kelleher mentioned the yearly cost of €2.4 million over the next few years. Will the Minister outline how the costs were calculated?
I would like to make a point regarding the windfall tax of 80%, which was introduced originally in a knee-jerk reaction. I understand that measure has not brought in even one cent since it was introduced. It was a crazy populist measure which was passed by this House.
I have mixed views in regard to rent supplement. In some areas of the country rents are disproportionately high because, under the old health boards, the rent supplement in those areas was greater than in adjoining areas although under the natural scheme of things rents in those areas would have been lower. That said, I believe rent supplement should be almost town specific. It is difficult to go about reducing rent supplement on a broad basis due to the number of factors to be considered, such as housing supply, the numbers on the waiting lists and the demographics of an area. There should be no carte blanche to reduce rent supplement across the board. Traditionally, in some areas rents have been disproportionately and inequitably higher than in adjoining areas, due to the fact they were in a health board area where rent supplement was higher. It is important the Exchequer gets value for money in regard to the rent supplement.
The issue of lists was mentioned. I believe that if we are to address problems, we must know the situation. I represent a mixed rural and urban constituency where there is a housing crisis and a severe shortage of houses. That said, I am deeply suspicious in regard to how lists are formulated. An attempt made to deal with lists in regard to medical cards was hamfisted and caused problems, but we must try to draw up lists that can distinguish between housing need and housing desire. Different counties take different approaches. Our lists are large and have increased significantly, but we must be able to establish the true extent of need. I do not have confidence that the lists we have currently are accurate, but this does not take away from the fact that housing is required.
In regard to the proposal before us and the Central Bank regulations, I believe the 20% deposit requirement for first-time buyers is too high. I believe the problem lies at the other end, the value of the house. The property difficulties we have had over the past decade were not because of a property bubble, but a money supply bubble. There was too much money available. We must try to address the difficulty in that context. I and my colleagues in the Reform Alliance produced a policy document entitled Fair Value, which we submitted to the Central Bank and the Minister for Finance. We will resubmit it to the Central Bank.
This document proposes we should establish a historical relationship between the average house price and the average income. In a stable economy, the average house price should be a certain multiple of the average income, whether four times, five times or six times that income and that this price should be used to calculate the loan. We want to stop banks giving out moneys indiscriminately, moneys taxpayers have had to pick up the tab for over the past decade. Some will argue that this gives cash buyers a significant advantage over people who must borrow. Unfortunately, such a situation is a sad fact of life. If I go to a garage to buy a car, I am in a better position with cash in my pocket than someone who needs to borrow money. If I have cash in my pocket it is easier for me to go on holiday than someone who needs to borrow.
The same is true in regard to housing. However, I believe housing is a right. It is difficult to address inequality, but we must try to address inequality of opportunity. We can do this in two main ways, through education and through the provision of housing. The new Minister for the Environment, Community and Local Government has not outlined his new housing policy in detail, but I believe policy is moving in the right direction, based on the headings outlined. I have, however, a concern regarding an issue mentioned by another Member, namely, the number of houses built in the mid 1970s. By and large, the standard of social housing built in this country throughout the 1970s and 1980s is a disgrace. We are all familiar with this housing in our constituencies. We must look again at our model of social housing.