I move:
That Seanad Éireann deplores the failure of the Government to produce a housing strategy capable of addressing the problems of first-time house buyers, deplores the lack of investment in public sector housing and calls upon the Government to implement as a matter of urgency the Fine Gael proposal to exempt first-time buyers of second hand houses from stamp duty.
This is a timely motion in view of the increase in house prices. A recent survey carried out by the Irish Auctioneers and Valuers Institute revealed that house prices had risen by 50 per cent in the last three years and will increase by over 12 per cent in 1998. Prices have soared to an all time high and have increased by 26 per cent in the past 12 months, with prices for houses and apartments in Dublin outstripping the rest of the country.
Demand is fuelled by potential house buyers being compelled to buy now because they are worried they will be unable to own their own house if they postpone purchasing. Increases in take home pay following the budget and falling mortgage interest rates have led to recent substantial house price increases. Already the average price of a modest, second hand artisan dwelling in the capital is over £100,000. In the past year prices rose higher than anybody could have forecast, confounding the experts. At public auctions houses have often been sold for twice the guide price.
The nature of the boom is underlined by the fact that it is not simply confined to Dublin. House prices have also risen in Cork, Galway and Limerick. The price of second hand houses grew by over 25 per cent between 1994 and 1996. A colleague told me a few days ago that in a village outside Dublin a two-bedroomed house on the main street was sold at auction for £250,000. That gives the House an indication of the enormous increase in house prices.
Increased take home pay, falling interest rates and the unparallelled willingness of financial institutions to give loan approvals are not the only causes for house price increases. The extremely favourable demographic trend must also be taken into account. The age group of 24 to 39 years is the crucial house buying age group and, by virtue of our high birth rate in the early 1970s, people in this age group are flooding the residential property market today. A recent survey carried out by the Society of Chartered Surveyors indicates that demand for housing in Dublin will outstrip supply well into the millennium. This will increase pressure for more zoning of lands and will force up the prices of houses in the suburbs.
When the Minister of State addressed the House on social housing recently, he said he was aware of the significant shortage of affordable housing and, having regard to the trend in house prices as a consequence, he would appoint consultants to undertake a study of the factors underlying that trend. The study would involve an analysis of the main factors influencing increases in house prices since 1994, with particular emphasis on the Dublin region. This study is a waste of money. We are already aware of the cause of increased house prices — demand outstrips supply. As a result, modest houses are sold at exorbitant prices. That trend gives young couples no chance of buying their own homes.
Another factor generating the current level of house prices is the shortage of zoned serviced land in Dublin. Many of my fellow councillors have been severely criticised for going against the advice of planners and rezoning land where services were not available. They were right to zone lands for housing and there is a grave responsibility on Government to provide the necessary finances to service zoned land. It is not a shortage of land but a shortage of serviced land which is causing the escalation in house prices and the provision of serviced land should be one of the Government's priorities. A fund has been initiated to assist local authorities to increase the supply of serviced land but, in the current situation, that funding is inadequate. The construction industry, too, has identified the lack of suitable serviced land for development as a contributing factor to the escalation in house prices. There is a grave responsibility on Government to provide more serviced land as a matter of urgency.
Another factor which has not helped housing supply is the punitive rate of stamp duty on second hand houses. It acts as a disincentive to vendors trading up. In an attempt to ease the burden on first time buyers of second hand houses, my party has proposed the abolition of stamp duty for the first £100,000 spent on such houses. This concession would save cash strapped first time buyers up to £6,000 on the purchase of their homes. At present, stamp duty is a massive disincentive to the purchase of a second hand house and is driving young people to live further from urban centres and, probably, their place of work. The removal of stamp duty on second hand houses will stimulate the second hand market and relieve the current enormous demand on new houses.
The Minister should also consider implementing effective measures to encourage the rental of houses. At present, families are unwilling to rent houses because a landlord can ask them to leave at one month's notice.
These are some of the issues the Government should address to ease the problems of first time buyers and make housing slightly more affordable for young people. However, I recently became aware of another practice which affects houses being built outside Dublin and which the Minister of State should ask builders to explain. In some estates houses are built in phases and there can be a price differential of £20,000 between, say, the first and third phase. Building costs could not have increased by that amount and the cost of land would have been included in the first assessment. This price hiking does not happen in Dublin. The Minister of State should address it.
In addition to the lack of affordable houses there is a short supply of social housing. My local authority, Dublin Corporation, carried out an assessment of housing needs in 1996. It revealed that there were 3,000 people on the housing list, 300 senior citizens, 143 homeless families and 500 homeless single persons. Taken with the 900 applicants in private rented accommodation supported by the Eastern Health Board, it produced a total of approximately 5,000 people on the housing list. After 1 November 1997 the corporation revised upwards the number of applicants on the list and there are now more than 6,000 applicants on the housing and transfer list.
This increase has been fuelled by the phenomenal growth in house prices in recent times. A number of young people on modest incomes bought houses in Dublin over the past number of years. However, young people today are unable to do so and find themselves on local authority housing lists. I am sure the same trend has occurred throughout the country. For example, 60 to 70 points are required to obtain a modest one bedroom flat in Dublin. Dublin Corporation also finds itself in difficulty in that when it will provide the 700 extra units in the house building programme over the next number of years it will have run out of building land and will then be unable to provide further housing. Our only hope will be with the Dublin Docklands Authority.
We pride ourselves on being a nation of owner occupiers but, unfortunately, this has become something of a myth. While we enjoy the benefits of the Celtic tiger economy there are disadvantages. We appear to be developing a compensation culture and our roads are more clogged with cars. Above all, the huge increases in property prices means that average house prices cost £50,000 more than the person on an average wage can normally borrow. There is an obligation on the Government to provide a mechanism to ensure that the price of new houses will remain within the reach of young married couples. I commend the motion to the House.