Deputy Tom Barry: I welcome the opportunity to speak on this Private Members’ business. It is timely, given the Central Bank’s announcement on the new regulations regarding the residential housing market. Of course, the key objective of these regulations is to increase the resilience of the banking and household sectors to the property market and reduce the risk of bank credit and house price spirals, such as we have seen, from developing in the future. The legislation for this will come soon.
It is important to note that these regulations are not designed to substitute lenders’ responsibilities to assess affordability and lend prudently because if due diligence was done in the past, a lot of the legacy issues would not be there today. The loan-to-value ratio for principle dwelling houses for non-first-time buyers will be 80%. For first-time buyers of properties up to €220,000, a maximum loan-to-value ratio of 90% will apply, but above €220,000, a loan-to-value ratio of 80% will apply on the excess. On buy-to-let mortgages, the loan-to-value ratio will be 70%. This should bring a little sense to this market.
I noted in one of the presentations that came before the Joint Committee on Finance, Public Expenditure and Reform, of which I am a member, that every change of 5% in the loan-to-value ratio brought about a 10% change in the value of the property. This is certainly a way to prevent property prices going out of all control and it is important that borrowers get into the habit to save as best they can and that the amount they must save is attainable.
Borrowing, when we got cheap funding thrown at us a few years ago, went out of control. The problem with it was that borrowers speculated. Many small businesses invested in properties and that non-core activity is putting a lot of core businesses under pressure. A lot of these issues have been resolved or dealt with, but it was a very painful time.
As the Minister of State said, under Construction 2020, the Government strategy for a renewed construction sector, we are looking at 25,000 dwellings a year for 15 years. That is a lot of houses, and it is good news for those in the building sector. There will be issues with zoning and with whether we have capacity to do all this, and access to finance must be done in a different way than before. We must be a little more innovative in the way we look at these.
On the new social housing supply, the provision of some 35,000 new social housing units over six years will be most welcome. Everybody in this House realises the demand that there is in clinics for applicants coming in looking to access social housing. This time around, we should concentrate on two-bedroom units and smaller units for those who do not need three-bedroom houses.
There is another issue, about which, of course, I am passionate. We should use this as an opportunity to build energy-efficient homes. Oil prices are now low. When they were high, there was considerable pressure because of the cost of heating a home. This cost is still a challenge. However, now that energy prices are low, we should use this chance to introduce systems such as district heating. There is no reason each house should have its own separate boiler and heating system. I have travelled to Denmark and seen district heating working using renewable resources, such as straw and many waste products that cannot be sold in the agricultural sector or are in excess.
Tuesday, 27 January 2015
|Dáil Éireann Debate