Proposals to dampen rush on property market being considered

Proposals to dampen rush on property market being considered

The new proposals are aimed at preventing another property bubble

The State’s advisory body on housing is exploring the idea of a savings incentive scheme to encourage house-hunters to defer buying homes and help to avoid the development of another property bubble. It is one of a number of ideas to be discussed at a “housing summit” meeting later this month with stakeholders involved in the property market, organised by the Housing Agency.

A shortage of houses for sale in the greater Dublin area to meet demand is a key factor behind a surge in property prices in the capital, which have jumped by some 23 per cent over the past year.

However, most experts agree it will take between 18 months and two years before there is any meaningful increase in housing supply.

Economists such as Colm McCarthy have advocated a targeted savings scheme as a way of taking some of the heat out of the property market, along with new rules seeking 20 per cent deposits for homes.

Special savings accounts could be established for first time buyers that were exempt from DIRT, he said, with modest improvements in deposit rates compared to what is available on the market. If the funds were not drawn down for house purchase within a period of a few years, the account could revert to a normal savings account with both benefits deducted.

“One element of a demand bubble is the sense that the train is leaving the station,” Mr McCarthy said. “The message from this kind of a scheme would be to stop people panicking, save up for your deposit, until there is a sufficient housing supply in a few years’ time.”

Conor Skehan, the chairman of the Housing Agency, said measures to dampen demand for homes until supply increased – such as savings incentives – would feature as part of its discussion with decision-makers from policy, practice, finance and industry.

“We think the low-hanging fruit could be reducing demand and the idea of deferring purchases is one of a suite of potential measures which could be taken with minimal cost,” he said. “There will need to be a number of initiatives. None on their own will work, but a range of them will need to done in the context of increasing the availability and affordability of homes.”

Last year, only 8,000 housing units were built nationally, down from 93,000 at the peak of the housing boom. Both the Government and Economic and Social Research Institute agree that about 25,000 houses need to be built annually to satisfy current demographic trends. The issues to be discussed at the summit meeting will feed into a report that will be submitted to the Government for consideration.

“We want to break down the silos in thinking and remind decision-makers that in housing, everything is connected,” Mr Skehan said. “It’s like a push-penny effect, with movement in one area affecting another. It might seem like a big leap to say there is a link between someone sleeping rough to houses for sale on Ailesbury Road, but it’s all connected.”

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