Demand Is Not The Issue; Experts Weigh In On New Government-Backed Mortgage Scheme

Property and housing experts said that a government-backed mortgage scheme will make Ireland's housing shortage worse, not better.

Earlier this week, Housing Minister Eoghan Murphy announced a government mortgage scheme where low-and middle-income earners can out mortgages at rates as low as 2%.

From 1 February mortgages will be available to people who have been refused twice by the main lenders. To qualify, you must be a first-time buyer and earn no more than €50K as single applicant or €75K for a couple.

The mortgages available can be used to buy a house valued at up to €320,000 in the greater Dublin area, Cork and Galway and €250,000 in the rest of the country.

The Government has set aside €200M for the scheme this year, which at current house prices will only facilitate the purchase of 1,000 houses if the average house is bought for €200,000.

“The Government should be focusing on the supply side, the demand side will fix itself," CBRE Head of Research Marie Hunt said.

“The only consolation is that this is just a test case, it won’t disrupt the market too much. But if it is rolled out across the board, you could be sending people to buy houses that don’t exist and it will fuel the demand side more.”

Sinn Féin Spokesman for Housing Eoin Ó Broin said that while the low interest rates are a good thing, the scheme “will push people into buying homes that [are] too expensive for them". 

“It runs the risk of increasing inflation further,” he added.

According to Daft.ie’s Q4 report, average asking prices in Dublin ranged from just over €304K in the west of the county to just over €564K in south county Dublin. 

House prices have risen 61% in Dublin and 47% nationwide since 2012.

The capital is the worst affected county in terms of a housing shortage at the moment with only 1,300 properties available to rent in Dublin on 1 November 2017, a 13.6% drop than on the same date in 2016.

DIT (Dublin Institute of Technology) academic Lorcan Sirr said the new scheme will drive up prices. 

“To qualify you have to be refused twice and in some cases people could end up borrowing up to five times their income," he said. "Twenty-three [to] 31% of other local authority mortgages are in default of three months or more so it’s very difficult to see how this will end up any different.”