Central Bank contributes to Dublin housing crisis, group says
Construction federation backs Alan Kelly and criticises bank’s deposit regulations
Tom Parlon, director general of the Construction Industry Federation. Photograph: Dara Mac Dónaill/The Irish Times
The Construction Industry Federation (CIF) is backing Minister for the Environment Alan Kelly’s claim that Central Bank rules are contributing to the housing crisis in Dublin.
Tom Parlon, director general of the CIF, said the need for a 20 per cent deposit to buy a home makes it impossible for first-time buyers to get on the ladder.
“We think Minister Kelly is absolutely right when he directs some of the blame at the Central Bank regulations,” said Mr Parlon.
It was more than just the deposit requirements that caused the blockage, he said, the loan-to-income (LTI) ratio of 3.5 was also an important contributory factor.
“This LTI figure makes it impossible for a two-income household on the average industrial wage of €70,000 to buy a three-bed semi in the Greater Dublin area, where house prices can average from €250,000 to €345,000, according to the most recent Daft.ie report,” Mr Parlon said.
“We know that an LTI of 4.5 applies in the UK, so we would urge the Central Bank to review these regulations.”
Mr Parlon also said it was bizarre that the Government was unwilling to reduce the tax take on new homes for first-time buyers.
He said the simple equation was that either prices must go up, which everyone agreed cannot happen, or costs must come down.
“Our members are currently unable to sell a house for what it costs to build it. We have made suggestions to the Government around reducing the VAT rate on new homes from 13.5 per cent to 9 per cent, even on a temporary basis, to kick-start the supply of starter homes.
“About €10,000 of every new house built is levies and contributions for the local authority,” he said.
One Labour source said the Minister had accepted the need for Central Bank regulations in the long run to cool the housing market.
Last year Tánaiste Joan Burton raised concerns when the Central Bank initially proposed to introduce a rule requiring house deposits to be 20 per cent of the value of the property.
She said the size of the deposit seemed quite high but she did not query the independence of the Central Bank.
Minister for Finance Michael Noonan also opposed the 20 per cent rule, but the Central Bank implemented it and house price rises in Dublin have slowed since.