There seems to be little doubt that Ireland is in the early stages of yet another property-related bubble, reminiscent of the disastrous Celtic Tiger era of the late 1990s and early 2000s. Except this time the expansion is driven by a lack of housing stock, taking home prices to exorbitant levels, placing purchased or rented accommodation beyond the reach of many ordinary people. While an unsustainable 75,000 housing units a year were being constructed during the old boom, this latest cycle is witnessing the release of comparatively little new housing stock (less than 9000 units were added in the five years leading up to 2017). Instead the focus is on pushing prices ever higher for existing locations, with claims of land banks and property hoarding by both domestic and overseas investors artificially distorting the market.
This growing crisis is reflected in the record levels of homelessness currently shaming the country (if not the “political centre”), which would be far worse if not for the number of adults relying on their parents and other relatives for a roof over their heads. And this is before we even factor in the potentially disastrous effect of Brexit on the inflated market in the Dublin region as international corporations in London move some of their European Union operations across the Irish Sea, complete with affluent white collar staff. A phenomenon made more likely if those seeking to remove the safeguarding regulations placed on the financial sector in the wake of the criminal Celtic Tiger decade get their way.
The biggest mortgage lender in Germany says there is political resistance to it entering the home loan lending market in Ireland because the Government wants to protect AIB and Bank of Ireland, the Sunday Independent can reveal.
Public savings bank Sparkasse, which writes 50pc of all German mortgages, says its lending model would help end the housing crisis in Ireland.
The bank, which is also noted for its support of local small and medium enterprises in Germany, operates in a similar fashion to credit unions and is, in effect, a public banking system. Sparkasse offers a significantly lower interest rate on mortgages in Germany compared with current rates here. A mortgage rate reduction of 1pc here would mean a saving of about €120 per month based on a €300,000 mortgage with a loan term of 30 years.
Now Sparkasse has linked political resistance to its entry to the mortgage market here to sensitivities surrounding the flotation of the Government’s stake in AIB and, possibly, Bank of Ireland.
The revelation comes as the housing crisis remains the key national issue amid huge concerns last week about rapidly increasing rents, homelessness and the inability of young people to get a mortgage.
While the minority Fine Gael-led government is supposedly working on a housing management plan of its own, there is precious little sign of any radical or innovative thinking about to emerge from it. With new homes in short supply, landlords are making a killing as prices approach previous record-setting levels in parts of Dublin and Cork. Locally, where I live, the average rent for a modest two bedroom apartment is now 61% higher than it was in 2014, pricing out all but the top wage-earners. This yawning void between demand and supply cannot go on without all of us going off the economic cliff once again.