Sir, - I was in the UK during the previous downturn in property values and witnessed much distress and suffering. People attended my surgery complaining of depression and stress directly related to their financial situation. People left the keys to their properties in the letter-box or in the offices of the building society and just walked away. Some people who wanted to move house could not sell their properties and were left to pay a mortgage that was much greater than the value of the property (negative equity). Ten years later, some people still have not recovered.
In Dublin, the rapid rise in house prices is already having two nasty effects. The first is that many people are now simply not able to borrow and are forced into the private rented sector. This group are vulnerable to rent increases at the will of the landlord. Rent controls are essential to stop exploitation.
The second is that many people are stretched to pay the mortgage and two full-time salaries are required. If interest rates rise to anything near the levels of the 1980s, I shudder to think what will happen. This is a serious concern because we now have no control over interest rates. Europe controls interest rates and if rates rise in Europe our interest rate will rise regardless of Ireland's economic need. One side of this lack of control is already occurred in that our interest rate has fallen despite the need in this country for a higher interest rate. If property values drop, the most vulnerable people are likely to be young couples with families - precisely the group most anxious to get on to the property ladder.
There must be more stringent action by Government and institutions to curb this spiral. It seems reasonable that the value of property ought to be regulated in some way (such as price increases in line with inflation plus five or 10 per cent maximum). After all, the prices of other commodities are tightly regulated, such as cigarettes, alcohol, cars and public pay (Partnership 2000).
While property is in short supply, investors and people who already own a property should be prohibited from buying. Denmark introduced laws to prevent people buying holiday homes because locals could not compete with rich foreigners. In this country, first-time buyers and "locals" cannot compete, and are excluded from obtaining what is a basic right.
The media and auctioneering firms must also be taken to task for hyping the whole situation. The property supplements are little more than glossy advertisements where the super-models are replaced by "super-property". And the media have an interest in this boom because they sell more papers and advertising.
It is unsatisfactory to just "tinker at the edges" and so far only the Bacon Report has made any attempt to address the crisis. If an economic disaster is to be averted it is essential that institutions, the Government and other interested parties (such as the silent combined residents' association, ACRA) urgently tackle this problem. If they don't, they will have to face the problems that arise when the market falls.
Recently, a two-bedroom former council house was sold in Dublin 2 for £170,000. This is absolutely ridiculous for several reasons. The taxpayer provided the property and there is a severe shortage of homes for people on housing waiting lists. Now this property has reverted to the private sector and someone has made a huge profit. Meanwhile, the new purchaser has a huge mortgage and there is one less property available to homeless families who are on the waiting list for years. The vendors of such properties may have inherited it and are in a position to make a profit. Surely, it would be reasonable that such properties revert back to the local authority in order to help replenish its urgently needed housing stock.
In the interim, and because it is the purchaser that finally decides, I strongly suggest that people do not buy houses at the present inflated levels for the sake of their health.-Yours, etc.,
Dr Brendan O'Reilly, Estuary Court, Seatown Road, Swords, Co Dublin.