If the next Taoiseach – which may well be Simon Harris if he gets voted into office by the Dáil – were in any doubt about the depth of the housing problems facing the State, the latest data will provide a sobering reminder. The upward march in house prices continued in January, according to new data from the Central Statistics Office, with a 5.4 per cent annual rate of increase in January, up from 4.1 per cent in December. Prices rose faster outside Dublin than in the capital. And there was a significant gap between the increase in new house prices of 9.2 per cent and the 1.6 per cent recorded for existing homes.
Rising prices move houses out of the reach of more and more potential buyers. To try to combat this, the Government has introduced a range of supports, including the Help-to-Buy programme and the First Home scheme, under which the State can take an equity stake. It is reasonable to conclude that at least some of the rise in new house prices is due to these supports, though higher costs have also been a factor.
As prices rise, existing homeowners gain, including those who bought in recent years on relatively high loan to value ratios. However, potential new buyers will be looking on nervously.Those availing of the First Home Scheme, in particular, need to consider how this scheme works in the longer term and the implications for their finances were house prices to fall back.
Progress is being made in increasing new housing supply and the Department of Housing on Thursday pointed to strong commencement figures for February. At least some of these housing starts are being encouraged by the ability of new buyers to afford higher prices, helped by State schemes. In turn, this makes it more difficult to end these schemes, even if a better long-term policy is to seek to reduce the cost of building houses, rather than boosting demand.
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Housing will clearly be central to the general election campaign. And it is important that these issues are teased out and that voters get a clear view not only of the targets the various parties will set for house building, but how they will get there. There are a whole range of difficult trade-offs to be faced, not only in relation to the demand schemes but more widely across the whole area of housing, to which massive State resources are now being directed.
This will continue – and so it should – but it is vital that it delivers for the public. The politically most difficult issue is that housing policy can only achieve results in the longer term. We have seen that it takes some time to ramp up house building and further increases will be necessary, given the increasing population. Whoever is in power will face the issue of high building costs and a shortage of skilled labour.
Quick fixes are not available. Best not to pretend otherwise.