Coalition dismisses claims of property bubble risk

‘Construction 2020’ plan aims to triple the house-building rate by end of decade

The Taoiseach Enda Kenny and Tánaiste Eamon Gilmore at the launch of Construction 2020 at Abbotstown, Co Dublin on Wednesday. Photograph: Eric Luke/The Irish Times

The Taoiseach Enda Kenny and Tánaiste Eamon Gilmore at the launch of Construction 2020 at Abbotstown, Co Dublin on Wednesday. Photograph: Eric Luke/The Irish Times

 

Opposition claims that new measures to kick-start the moribund construction sector will lead to another property bubble. Taoiseach Enda Kenny and Tánaiste Eamon Gilmore insisted yesterday that there would be no return to the bad practices of the past in which government policy served only to magnify the property boom and the subsequent crash.

The Construction 2020 plan, which aims to triple the house-building rate by the end of the decade and create 60,000 new jobs, includes proposals for new State interventions in support of first-time mortgage lending to young couples buying new homes.

The Government will decide in November whether it will proceed with a “mortgage insurance scheme” which might offer a form of State guarantee on up to 10 per cent of a mortgage. The idea is to boost new house buyers’ creditworthiness, who might have saved enough for a 10 per cent deposit, but whose lenders demand a 20 per cent deposit.

Although this is by far the most contentious element of the initiative, the Government has resolved to examine whether there should be a price cap on applicable properties, geographic restrictions and time limits on the availability of such support.


75-point plan
The 75-point plan also includes a pledge to boost the supply of new housing in Dublin and to deploy Nama to support the construction of 4,500 houses and apartments in the greater Dublin area.

The Government will direct the Department of the Environment and the city’s four local authorities to set up a taskforce to tackle the housing shortage in Dublin.

This group will have a mandate to confront obstacles to “viable and appropriate developments” and one option is to penalise owners of vacant property which is not being developed.

There will also be an overhaul of the planning system, including the establishment of an independent planning regulator.

In addition, the new strategic investment fund will be empowered to make equity investments in property development for an economic return.

While legislation will be published this morning to transfer some €6.8 billion in the National Pension Reserve Fund to the investment fund, property would make up only a small part of its investment.

Mr Kenny and Mr Gilmore presented the initiative as a serious effort to encourage construction activity after a drastic decline following the crash.


‘Sustainable levels’
“This construction strategy is fundamentally about increasing activity in the construction sector to sensible, sustainable levels, and supporting viable job creation and employment in the sector,” Mr Kenny said.

However, they faced immediate Opposition claims of electioneering ahead of the local and European polls next week and warnings that a mortgage-support scheme would herald a return to damaging practices of the past.

In particular, Fianna Fáil finance spokesman Michael McGrath said the proposal was little more than an election stunt designed to drive up house prices and shore up the balance sheets of the banks.

This drew a caustic response from Mr Gilmore, who said Fianna Fáil should observe “a long period of repentant silence” on property matters. Mr Gilmore said there was only one thing worse than a property bubble: a burst property bubble.

Reform Alliance TD Lucinda Creighton warned the proposals would cause a bubble, driving prices higher as competing buyers bid against each other.