The price of housing

Sir, - I confess that until I read the article by Garret FitzGerald (Opinion, June 3rd) I was completely bemused by the policies…

Sir, - I confess that until I read the article by Garret FitzGerald (Opinion, June 3rd) I was completely bemused by the policies pursued by successive governments to achieve their publicly stated objective of maximum home ownership.

Their policies appear to be designed to fuel house prices rather than lower them. Thus, for example they tax the purchase of a second-hand home, but they do not tax the purchase of a second house, even though most of the houses for sale in the sensitive areas are being purchased for speculative reasons. They reduce capital gains tax to encourage the release of land, but do not place a moratorium on it - with the threat of windfall taxes to follow - to ensure its release. They use compulsory purchase orders to buy land before it is rezoned as a highway, but they do not use CPOs to purchase land before it is rezoned for housing!

One could go on and on. Suffice to say that governments since the mid 1990s have eschewed policies that would have the effect of lowering prices, while purporting to favour a policy of maximum home ownership.

Garret FitzGerald, however, may have inadvertently provided the answer to this riddle, when he urged the Government to maintain house prices at their current levels - through the widespread purchase of new houses by the State if necessary - in order to avoid the emergence of negative equity.

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The interesting aspect of this justification for high house prices is that it applies only to a small proportion of the population. Negative equity would not injure those who had a house before the current price escalation. Nor would it significantly affect recent first-time buyers who purchased only one house, since the replacement cost will not change. Of course there are circumstances where recent purchasers might not have to replace their house after a sale, and where negative equity would result in a loss of income, such as emigration or inheriting a second house. But their numbers would be small, and certainly lower than the number of first-time buyers who will suffer from a continuation of the current policies.

Negative equity, however, would have a major effect on the asset value of houses that have been bought for investment. Dare I suggest that an audit of the number of politicians who own more than one house might be revealing. - Yours, etc.,

John McGrath, Kilbride, Co Wicklow.