It must be the political equivalent of scratching an awkward itch, to meddle in the property market, as politicians seem to get an unnatural pleasure from it.
According to the usually well informed Political News Editor of the Irish Times, Arthur Beesley, writing his newspaper’s lead story this Thursday, the government is thinking about stimulating the first time house buyer market. How? According to the article, “The idea is to boost new house buyers’ creditworthiness in situations where they might have saved enough for a 10 per cent deposit but where lenders seek 20 per cent.”
At ISME we ask, why do this? It’s most likely because it would be politically popular and after all politicians like popular. But it’s more ill-informed economic madness. Giving a swathe of people who are in the position to save for a house, using taxpayers’ money is wrong at a number of levels. It’s unfair to those who will never be able to afford to save for a house. And it’s stupid because all it does is drive up the price of houses.
Back in the 1980’s, when again politicians were trying to buy votes, the government decided to give out £2,500 grants to first time house buyers (equivalent to near 10% of the value of starter home at the time). Subsequently in an RTE interview the late Charles Gallagher, then boss of the Abbey Group, a major house builder, admitted that they, along with most other builders, bumped up their prices by the exact amount on the day of the announcement.
Using either State cash or State backed credit (that’s you and me folks) to allow people to buy a house is wrong. Any actual credit or credit guarantee should be made available to SME’s until someone finds a way of easing this country’s credit constipation. The economy is on the up. If our leaders want us to be able to meet future economic demand, then businesses can’t do it without working capital. “Working capital”, the only two words that should be discussed by our economic ministers at the moment.
For once we at ISME hope Mr. Beesley’s information is incorrect.