Dáil Éireann Debate, Thursday - 9 December 2004
7 Mr. Crowe asked the Minister for the Environment, Heritage and Local Government if he anticipates that house prices will rise as a result of the changes introduced in the budget regarding stamp duty; and if he will make a statement on the matter. [32741/04]
Amharc ar fhreagra8 Mr. McCormack asked the Minister for the Environment, Heritage and Local Government his views on whether the revised predictions for house price growth will lead to a further distortion of the housing market, with fewer first-time buyers able to purchase their own home; and if he will make a statement on the matter. [32753/04]
Amharc ar fhreagra87 Mr. Quinn asked the Minister for the Environment, Heritage and Local Government if his attention has been drawn to the housing statistics bulletin published on 16 November 2004 which showed that the average price of a new house had increased by almost €24,000 nationally and by almost €34,000 in Dublin since the beginning of 2004; if he has plans to implement a new strategy to reduce the spiralling costs of house prices here; and if he will make a statement on the matter. [32679/04]
Amharc ar fhreagraI propose to take Questions Nos. 7, 8 and 87 together.
The rate of house price increase has generally declined in recent quarters and is now considerably lower than in the late 1990s. Increases in the June quarter of 2004 were generally lower than at any time since early 2002 and were much lower than in the June quarter of 2003. Most commentators predict that the trend in prices will increasingly moderate in the coming months and years. The likelihood of this is underpinned by the trend of housing output, with a further record level likely to be achieved this year and indications of a continued very high level of output in 2005 and subsequent years.
The Government will continue its strategy of promoting a high level of housing output to meet demand, achieving adequate output in all areas and pursuing a range of measures to assist affordability, particularly for first-time buyers. The affordable housing initiatives introduced by the Government are showing increasingly positive results and it is expected that up to 11,000 units will be provided between 2005 and 2007.
The stamp duty reductions announced in the budget will further assist affordability for first-time buyers with savings of up to approximately €12,000. This will help some first-time buyers to afford a starter home who might not otherwise be able to do so. It will help to open the second-hand market more to first-time buyers who had been increasingly deterred by the impact of stamp duty. The likelihood of causing increases in house prices is minimal in the context of high levels of housing output and because the reductions have been confined to the first-time buyer segment of the market. The reductions in stamp duty for second-hand houses should have a restraining effect on new house prices by removing distortion between the two categories and reducing the degree of concentration of first-time buyer demand on the new house market.
The indications for the coming year in regard to overall housing output, affordable housing and house price moderation are positive. The Government will ensure that effective policies continue to be applied and reviewed as necessary in the light of developments, with the overall aim of meeting the broad spectrum of housing need in the context of balanced and sustainable growth of the housing market.
The Minister referred to a range of measures to assist first-time buyers. What are the measures and will he itemise them? On budget day, the Minister of State may have heard an interview with an auctioneer who stated it was his belief that the adjustments to stamp duty on second-hand homes would have no effect on the price of housing. The auctioneer argued that the market value of properties would simply move upwards. Would the Minister challenge this assumption by a senior auctioneer? What is the Minister doing to bring down the price of houses? For example, when will the ninth progress report of the All-Party Oireachtas Committee on the Constitution, which made firm recommendations, be brought forward? It is a document suggesting a range of measures which all agree would have significant impact on the price of houses, new and second-hand.
I saw the interview with the auctioneer on budget day, which showed that there are many sides to this argument. He stated that the job of the auctioneer is to try to beef up the price to the maximum on behalf of the seller. Whatever about his belief, since then I have talked with some potential buyers in their late 20s and early 30s, and the perception of young potential first-time buyers is that the budget measure is very helpful and positive. I am sure the Deputy has also met some who appreciate it. They strongly believe it will be of benefit to them, which it will.
The measure should take the pressure off the new house market because what happened in recent years, perhaps because of the burden of stamp duty, as people saw it, is that first-time buyers concentrated on the new house market and shied away from the second-hand market. This will help to rebalance the market to some extent.
With regard to the range of measures, there were previous reductions in stamp duty before last week's significant reduction, and changes were made to mortgage tax relief two budgets ago. Moreover, the Department now spends over €20 million per year on site subsidies, specifically geared at buyers in a particular income bracket. There is a range of measures to help people in specific income brackets.
On the Deputy's other point in regard to the All-Party Oireachtas Committee on the Constitution, previous commitments were given that we would debate its report in the House when the National Economic and Social Council report was published. I hope the NESC report will be published soon after Christmas. The Goodbody report and the NESC report consider different aspects of the matter and we will have a debate on the overall issue in the new year.
I welcome the abolition of stamp duty for first-time buyers. Given the significant difference in house prices between Dublin and the rest of the country, does the Minister believe the ceiling of €317,000 will benefit fewer than would wish to gain from it? The average price of a house in Dublin is approximately €317,000 as we approach the end of the year. Therefore, the average first-time buyer in Dublin will pay stamp duty whereas the average first-time buyer outside Dublin will not. There is an inequality in this regard that could be addressed.
Will the Minister consider introducing a special savings scheme for first-time buyers whereby, for example, for every €3 they would save, the State would contribute €1 over the same period as the present special savings incentive scheme. This is important to first-time buyers who contact me and there is significant interest in the implementation of measures specifically aimed at the young. However, we need to do more. What is the Minister's view on these issues?
I accept that prices in Dublin are higher than elsewhere. However, for good or ill, with regard to loan limits it has always been policy to treat the country as one and to maintain the same limits in all places. While I accept the average price of a house is as the Deputy stated, when the figures are trotted out each month by the Department or others in the business, the overall average house price is not necessarily the average price of a starter home. There is a significant difference between the two. These figures are repeatedly published but when I opened different affordable schemes in County Dublin in recent weeks-——
There are only 300 affordable homes in the country. The Minister is dreaming.
In recent weeks, in Balbriggan, which Deputy Morgan knows well, we opened affordable homes priced at €140,000 for two bedroom homes and €160,000 for three bedroom homes.
It is perhaps seven years since they were announced.
The average house price includes houses worth €1 million and €5 million. Statistics sometimes do not show the reality in regard to starter homes.
We are talking about the mean.
"Mean" is the word.
I accept that the problem for many young people is acquiring a deposit. I hope to bring a Bill to the House next week in this regard. Up to now, the State exclusively funded affordable homes. However, for some time we have tried to involve private enterprise in this. It is now happening and private enterprise will provide 97% loans, which will help. However, I accept the greatest problem for many young people is not getting the mortgage but getting the deposit. I do not want to show my age but in my time, young people were encouraged to save for this type of thing rather than blow €200 on a Friday night and the same again on a Saturday night. However, I accept the Deputy's point.
How does the Minister of State expect them to save if they are spending €1,000 per month on rent?
The measures in respect of stamp duty in last week's budget will greatly assist those people because it will relieve the burden of this one-off payment.
I thank the Minister of State for sharing with us the information that he still has his Confirmation money. He drew a distinction between the average price of a new house and of a starter home. What is the average price of a starter home in Dublin, excluding affordable housing? He expressed confidence that house price increases were moderating and that the measures in the budget would not add to house price inflation, about which I hope he is right. By how much does he expect the average house price to rise in 2005?
For all its talents, the Department does not make projections or predictions in regard to forecasts——
How can the Minister of State say house prices will moderate?
Most of those who make predictions have talked about a 10% increase this year, a 5% to 8% increase next year and a 0% to 4% increase the following year. The trend is definitely downwards and has been for a few years. I hope that will continue.
There are no official statistics on the average price of a starter home. Information on it is anecdotal.
The Minister of State is spoofing.
I am not.
He is on the ground and knows what is going on.
I am on the ground too.
The Deputy is on the ground in a more rarefied place than the Minister of State.
The price of a starter home would be different there.
The price would vary from the north side of the city to the south side. The price of a starter home is an average price. If one looks at the newspapers each week, one will see there are many starter homes in the €200,000 to €250,000 market. In the affordable bracket under the 1999 scheme, prices range from €150,000, €170,000, €180,000 to €195,000. In my area and in places like that, prices are in that bracket. Obviously, houses on the south side would be more expensive.
That is for sure.
Perhaps it is a nicer place to live with a more expensive image and so on.
If one looks at the affordability index, the percentage of take home pay most people pay towards their mortgage is still around 32% which, by and large, is not hugely different from what it was, say, in the early 1990s. It was very bad then, but it improved. Of course, it got worse again. However, for most people, the deposit is the problem. Most people can manage to pay their mortgage once they get it. People perceive the initial deposit and the stamp duty on secondhand houses as being the problem. The measures in last week's budget will certainly be of considerable help.
What about the removal of the new house grant?
The Minister of State is making remarkable claims given that he cannot tell us the average price of a starter home or by how much he expects prices to rise next year. The average price of a house in recent years has been increasing at an average of approximately 12%. Is the Minister of State saying that the average price of a house in 2005 will not increase by more than 12%? When he said house prices will moderate, by how much less than 12% does he expect them to rise? Given that the Government made a concession in the budget to demands from this side of the House on stamp duty, I find it unbelievable that it would not have modelled how that would play out in terms of house prices. What is the expectation of house price increases in the coming year?
I welcome the adjustments made in last week's budget in respect of stamp duty. Given that there is a new Minister in the Department, would the reintroduction of Part V be considered to assist in the housing crisis?
I tried to answer Deputy Gilmore. House price increases were running at approximately 12% but the rate of increase has been dropping slowly.
Will it be less than 12% next year?
Yes. Most predictions indicate that by year end, it will be approximately 10%. The predictions of those who make such predictions are that, next year, it will be in the region of 5% to 10% or 6% to 9% and that the following year, it will decrease further.
A rate of 5% would be very good.
It is all about supply. Supply is increasing all the time and it is the answer in trying to bring moderation to prices. House completion figures for this year look like being 75,000. The Deputy will recall that in the early 1990s, figures ranged from 20,000 to 30,000. In 1993, the figure was 22,000 and last year, it was 68,000.
It is very funny that the ordinary worker could afford to buy a house back then.
This year, the figure looks as if it will be more than 75,000. If we can maintain that level of output, those who make these forecasts say prices should calm down.
Will it be between 5% and 10%?
A rate of 7.5% is too high when inflation is under 3%.
