Sinn Féin plans to bring down house prices substantially would plunge many people into negative equity and make it harder for people to get mortgages, Taoiseach Leo Varadkar has said.
Mr Varadkar was responding to comments by the Sinn Féin leader Mary Lou McDonald in an interview in today’s Irish Times, in which she said that her party’s policy in Government would be to get house prices “as low as we feasibly can” and that average prices in Dublin should fall to about €300,000 – a fall of over 30 per cent from current values.
“That would have significant consequences,” Mr Varadkar told political correspondents at a briefing in Government Buildings on Wednesday afternoon.
“It would put a lot of people into negative equity, particularly the vast majority of people who bought their first home in the last couple of years.
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“And it would also send a message to the banks – because if banks and lenders hear that the potential next Taoiseach wants house prices to fall by that much, they will think twice about issuing mortgages to people against assets that are going to be worth less,” he said.
Mr Varadkar said he understands “the intention behind Mary Lou’s comments” but added “people are really listening to what she says now – bankers, lawyers, financiers, investors, and if the message she sends out to lenders is that if you issue a mortgage to somebody I’m going to try to make the collateral to that worth less, the message then is, issue fewer mortgages and put up interest rates”.
[ What would it take for Dublin house prices to fall to €300,000?Opens in new window ]
“I’m not sure she fully appreciates that she is now in a position where what she says really matters,” Mr Varadkar said.
“There’s a transition you have to make from opposition to Government and a transition you have to make from minister to Taoiseach. And I understand being on the wrong side of that. I just think Mary Lou needs to think more about the things she says about investment and tax, about asset prices, house prices, how that can actually hurt people.
“You know, I wouldn’t like to see huge numbers of people fall into negative equity and I wouldn’t like to see banks being afraid to give first time buyers mortgages or putting up interest rates as a result of factoring in a potential fall in house prices,” he said.
Mr Varadkar said the best way to enhance affordability was to have a situation where “incomes rise faster than house prices”.
“It’s not by having house prices collapse and we remember the last time that happened – huge numbers of people ended up in negative equity, mortgage arrears, and the banks stopped lending. That’s not how you achieve sustainable affordability in the long term,” he said.
“We see incomes now rising faster than house prices and if we can sustain over the next couple of years, that’s how you achieve real affordability, it’s not boom-bust-crash-surge – that’s what’s got us into a lot of trouble in Ireland.”
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