The building, buying and selling of property comprise a big jungle of which people have a pretty ropy understanding. The system seems to suit the developers, sellers, landowners and everybody except the first-time buyer or the person who actually needs a house in which to live. It would be preferable if it suited the latter.
The odds in this jungle are stacked very heavily not just against the first-time buyer but also against the person buying a home in which to live. I do not want to lay all the blame on the Government for the young first-time buyer not always being able to buy a property but there are circumstances in which it is obviously fair that the Government interfere in what is known as the free market. There are social circumstances in which this applies and it certainly applies in the case in question.
Young people are finding it impossible to get on the housing ladder. The average first-time buyer’s house in Dublin costs approximately €350,000, which is a very high price and unaffordable to someone earning an average income.
There are ways of tackling this issue. It can be done on the supply side and the Government has had a go in this regard. It is not a matter of reducing stamp duty, as Senator Cox said. There is a bit of a myth about stamp duty as it is not a tax on the buyer but on the seller – nobody quite realises this. The former Minister for Finance was in full agreement with me in this regard, as he stated in this House not very long ago.
Let me explain what I mean. If one buys a house and pays 6% or 7% of the cost as stamp duty, or 9% if one pays at the top rate, one must have the money to do so. One must have borrowed it or acquired it somehow and have it in one’s back pocket. If there were no stamp duty, one would pay the same price for a house because the price would simply increase accordingly. The buyer, who would have the money to pay if there were stamp duty, would be prepared to pay the same amount if there were none. It does not matter to the buyer whether the money is spent on stamp duty or on the house and therefore the person who is actually getting less from this system is the seller. Stamp duty is therefore a tax on the seller although it does not appear to be so.
What can the Government do to reduce prices? It is a very difficult question because there is a kind of conspiracy against the first-time buyer. It is not just the establishment that is involved – also included are auctioneers who conspire against the first-time buyer and enter a cabal to ensure that nothing works in his or her favour, as Senator Bradford stated.
The banks are also involved because they are lending money recklessly, thus increasing the price of houses. They do not care about the consequences for the buyer. They are lending recklessly in a period of very low interest rates. This is fine if one wants to borrow a lot of money at present but it will be bloody murder when interest rates increase suddenly. I am not referring to the gradual increases which I suspect will occur next month or next year. When they increase suddenly, first-time buyers who have managed somehow to get on the property ladder by paying extraordinarily high prices will find they are being crucified by the same banks that have been so generous to them in the past.
The consequence of this will almost certainly be a fall in the property market. The only question, as the economists’ conference identified this week, will be whether the fall will result in a soft or hard landing. The social consequences will be such that houses will come on the market because people will not be able to pay for them, and there will be negative equity.