Sir. In view of the ESRI's concern recently about spiralling house prices in Dublin. potential buyers might do well to take a history lesson from what happened in the UK in the late Eighties and Nineties when people bought houses at inflated prices and when the bubble burst were left with negative equity i.e. their mortgage was more than the value of their house.
This could be the road that many are going down in Ireland. House prices are shooting up, but wage increases are not keeping pace and, indeed, cannot under the social partnership agreement. Therefore people are stretching themselves ever more to buy a house or apartment and are depending on interest rates remaining low. But, because of the single currency criteria, interest rates are being reined down. In one way this is good and in another it is forcing a distortion in the market. Also the section 23 tax incentive - no tax on income from rent for ten years - is responsible for a large part of the problem, as was the mortgage interest relief that Thatcher enacted (and thus unbalanced the market) and then abolished in the late Eighties, which brought it back to equilibrium in the UK.
While Section 23 has done much to rejuvenate many depressed areas and has been a great boon to the building industry, I believe that the government should look closely at its further knock on effects. Unfortunately, its abolition could be just the pin to bust the bubble and leave people with the dreadful negative equity I mentioned. Damned if you do and damned if you don't. - Yours etc.,
University Street
Belfast BT7 IFZ.