A housing market speeding towards social disaster

A few years ago, my husband and I consider downsizing; the problem then and even more so today is the shortage of suitable, smaller properties in our neighbourhood, either to buy or rent and at what I considered a fair value.

Our housing situation doesn’t rank very high – we are among the most privileged home owners in the country and are not compelled to find a new home. But we are part of the hugely dysfunctional and unfair housing market in which hundreds of thousands of younger people are being held hostage to government policies that have manipulated, to their complete detriment, both the supply and price of homes to buy or rent.

At risk is more than just another price collapse and widespread negative equity as house prices hit blistering hot values again, but an even more polarised society between the old and young and haves and have-nots.

After last week’s revelation about how two new suburban housing estates in Kildare and Dublin have been bought up by foreign investment funds and will only be for rent, are we finally starting to hit peak outrage at the government’s decades-long policies to keep property prices as high as possible?

Some politicians now seem to be scrambling around to see if the ‘vultures’ they welcomed in in 2013 with massive tax breaks, can be stopped from circling around not just the blocks of apartments, shared student accommodation and hubs with their soaring rents, but also entire new streets and neighbourhoods of houses that would otherwise have been bought by young couples and families as their starter homes.

Has the penny finally dropped with them that when governments do everything in their taxing power – for decades - to ensure that prices always keep going up for the benefit of land owners, developers, property investors and financiers, that eventually an affordability crisis will happen?

This isn’t just an Irish problem. Even countries that didn’t experience our catastrophic boom and bust are seeing ordinary buyers, especially first-time ones with good education and jobs, priced out of their housing markets. The pandemic has slowed down the building of new supply, but the post -2008 global financial crisis – business failures, higher unemployment, nervous bond markets were never allowed to properly play out.

The intervention of central banks (especially the US Federal Reserve) propped up failed businesses and their financiers on Wall Street, not the little guy on the high street including the house builders and developers. Banks tightened up credit for them and their customers looking to buy a home.

In every developed country, especially in the cities where young people have been chasing jobs, affordable housing is a problem; rents are soaring and the vultures are flocking. In Ireland they enjoy the most profitable of tax regimes from governments who have always rewarded land and property owners and the class that keeps them in office.

Over the past 20 years tens of thousands of our young adults - well-educated and comparatively well-paid in Ireland have emigrated to escape untenable property prices and rents. Unfortunately those who left just before the pandemic are now finding the same problem in major cities in the US, Canada, Australia, New Zealand and an increasing number of European cities.

Global institutions, favoured with cheap ‘stimulus’ finance from central banks, and encouraged by our own governments are now directly targeting and making massive profits off … the little guy.

This is where I usually try to make a few suggestions on how to get around this personal finance roadblock.

Not this time.

Aside from having wealthy parents or winning the Lotto, there’s no ‘solution’. We have been sleepwalking towards social disaster, a journey that the pandemic is speeding up.

I don’t have much faith in a government that is just now debating the merits of drive-through and 24 hour Covid vaccination centres being able to correct the tax policy mess it created in 2013 and has let rip ever since. The soaring Exchequer deficit of c€7.5 billion and national debt (c€240bn) doesn’t provide much room to borrow the tens of billions needed right now and for the next decade to create an affordable, equitable housing market.

A genuinely fair property market means that rents will come down. Most house prices – yours, mine - will come down, plateau and eventually grow mainly in line with inflation. If that happens a lot of people will fall into negative equity. Others, with all their net worth tied up in their bricks and mortar will be worth a lot less than they are today. The really rich landowners, landlords and property owners will certainly be a lot less rich.

Is this what we really want? Or do we want – demand – perpetually higher property prices? You know, for our old age, or better still to leave as an inheritance to our children and grandchildren who are renting from the foreign investment trust and pension fund.

It’s certainly what we vote for.

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