Blog Home  Bookmark and Share

House Prices: The Real Financial Scandal

| No Comments | No TrackBacks

It is a pity that outrage over AIB's overcharging and NIB's transgressions is not being directed also at the fact that house buyers were obliged to borrow €17 billion last year to acquire overpriced houses. Arguably, if house prices had been, say, 10% lower, these new borrowings might have been reduced by as much as €2 billion and interest payments would have been lower for new and recent borrowers throughout the life of their mortgages.

Having ceded control over interest rates to the European Central Bank, the Government tried, and failed, to contain house prices by tinkering at the edges - mainly by encouraging the building of even greater numbers of overpriced houses. It has ducked real issues such as land prices and hoarding, excessive lending, inflationary tax incentives, profiteering, overcharging and tax gouging. As a consequence, hundreds of thousands of house buyers will be making excessive loan repayments amounting to billions of euro for decades to come.

Given that house prices have escalated to such a degree, containment of price inflation is no longer adequate. It is small consolation to see a slow down in price increase when current prices should never have been reached in the first instance. Instead, what is needed is a substantial reduction in house prices to bring them back to levels that make them sustainable when interest rates rise and economic growth moderates.

To start this process, the Government should immediately establish a Task Force to implement key suggestions in the All Party Committee on the Constitution's progress report on private property. If the Government fails to unwind the house price problem in an orderly way, then its much-beloved "market forces" will do the job with consequences that will be many orders of magnitude greater than the current financial scandals.

Lead letter in the Sunday Tribune and published in Sunday Business Post on 8th August 2004.

No TrackBacks

TrackBack URL: http://www.planware.org/cgi-sys/cgiwrap/bf/managed-mt/mt-tb.cgi/35

Leave a comment

OpenID accepted here Learn more about OpenID
Powered by Movable Type 4.25

About this Entry

This page contains a single entry by Brian published on August 5, 2004 12:16 PM.

Decentralisation was the previous entry in this blog.

Flawed International Comparisons is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

Top of Page