“Never
had it so good" claim some media pundits – this is definitely
not true if you are trying to buy a house. 100% mortgages are now on
offer and you might be able to "buy" a house, but you could
be repaying the loan for 40 years, well into your retirement!
Gone are the days when young people could hope to have paid their mortgages
off in their 40s or 50s. By the time you are finished paying back the
bank, you will probably have paid for your house three times over. Someone
taking out such a mortgage on a €375,000 three bedroom house will
end up paying €750,000, and that’s only if interest rates
remain at 4%. The EBS calculates that first time buyers will have poured
€8.5 billion into companies in the housing market this year alone.
Only ten years ago, first time buyers could have bought a three bedroom
semi-detached house for €69,350. Now they would have to fork out
an average of €290,711, or €388,466 in Dublin. The ECB interest
rate hike of 0.25% will add €56 a month to a €200,000 mortgage,
and the predicted further rise of 0.5% by the end of the year will add
over €100 to monthly repayments on a €250,000 mortgage.
In view of these price hikes, recent efforts by IBEC to blame wage increases
for inflation ring ridiculously hollow. In fact the ratio between the
average wage and the average house price is 11:1 and even wider in Dublin.
This is causing jitters amongst the parasites in the financial institutions
who fear that such a disparity could lead to widespread defaulting on
mortgages as prices and interest rates continue to rise. Some financial
institutions warn that as many as 50,000 mortgage holders could find
themselves in difficulty.
Already, first-time buyers can be spending up to a third of their income
on mortgage repayments. This can only get worse as prices rise, yet
lenders are throwing credit at people at the highest rate ever in the
last five years.
However, another spectre hovers. As long as prices spiral exponentially
away from the real construction costs, the prospect of the bubble bursting
looms. Thousands of new buyers could be left in negative equity where
the value of their house drops below what they paid for it.
A further consequence
would be large job losses in construction. RTE economist George Lee
has said that the basis of the boom in the economy has changed from
previously being fuelled mainly by foreign direct investment, to now
being dependent on the construction boom.
Public
Housing - not Private Profiteering
Under fire about
soaring house prices, the government has retaliated with statements
that it intends to spend €1 billion on various social housing schemes,
including the on-going work on 7.600 social housing units and the construction
or acquisition of an extra 6,000 units.
A quick comparison with the hard facts reveals these promises to be
a whitewash over an appalling lack of intention to seriously tackle
the housing crisis.
The National Development Plan proposed 35,000 social and affordable
houses to be completed this year, yet only 5,000 will come on stream.
This represents a tiny proportion of the 81,000 houses built last year,
the majority of which will have been sold in the private sector and
out of reach for thousands of people.
In the meantime €1.63 billion of taxpayers’ money is being
handed over in rent supplements to private landlords eager to take advantage
of the 43,684 families on council waiting lists. This figure is about
equivalent to the number of households in Cork City! That 40% of tenants
in the private rented sector are on housing benefit shows the extent
of the public subsidy enjoyed by private landlords. In reality the government
is involved in a form of privatisation by stealth of people’s
social housing needs.
Any serious attempt to tackle house prices and the massive social housing
crisis means tackling the land speculators, developers and financial
institutions. The Socialist Party believes that an emergency social
housing programme is required to end the waiting lists and that through
the nationalisation of the banks and financial institutions, people
can be given cheap credit to allow them to purchase their own homes.
For
a socialist housing policy
• Compulsory
purchase of land by local authorities at agricultural prices to build
up land banks for an emergency social housing building programme.
• Public ownership under democratic workers’ control &
management of construction companies and financial institutions in order
to:
a) Bring down prices and allow re-investment in a massive
public house building scheme for low cost rent/purchase;
b) Enable the redirection of €1.63 billion of
taxpayers’ money from subsidising private landlords into public
housing
c) Ensure decent wages and conditions for construction
& allied trades workers.
