IPAV sets out how new Govt could cut €32k off new home prices
The new Government needs to incentivise small and large builders by making building finance available at interest rates of between 1pc to 3pc, IPAV, the Institute of Professional Auctioneer & Valuers, has said in a new document being sent to all political parties entitled ‘Tackling the Housing Crisis’ .
The organisation says mezzanine finance currently available at exorbitant rates of 15pc to 20pc, is prohibitive and all such costs are passed on to the house buyer.
IPAV is also calling for the Department of Environment, Community & Local Government to be empowered to provide such finance to builders who may wish to participate in what would be an Agreed Price Building Scheme (APBS), which would be in the region of €100 per sq. foot, excluding site costs and works. The organisation estimates that both these measures could slash €25,000 from the cost of a typical home. A VAT reduction from 13.5pc to 9pc would cut an additional €7,000 approx. from the price of a home with no loss to the Exchequer since it would benefit from increased volume of house sales.
IPAV says the measures would be fail-safe since the Government could readily borrow from the ECB at historically low interest rates, and the monies would be repaid to the Government as the properties are sold.
Among the other measures in the document are:
Ø A full Cabinet post for the housing sector;
Ø An easing of the Central Bank mortgage lending restrictions by increasing the loan to income ratio from 3.5 times income to 4 or 4.5 times income;
Ø Increasing the number of areas of operation of the new Development Contribution Rebate scheme beyond Dublin and Cork to prevent the kind of acute shortages currently being experienced in these cities reaching regional centres in the next 18 months. The scheme during 2016 and 2017 offers, subject to certain conditions, between 80% and 100% rebate on development levies paid;
Ø Extending the scope of this scheme to include developments of less than 50 units;
Ø A review of the recently introduced Vacant Site Levy of 3pc to ensure it is sufficient to serve its intended purpose of preventing the hoarding of sites by speculators and bringing more land in city centres into production.
Pat Davitt, Chief Executive of IPAV says the series of measures are intended to “release the stubborn impediments that are central to deepening and exacerbating the current housing crisis.”
“Choice is diminishing and social change is being foisted upon people. Those who can’t rent are falling into homelessness, are being temporarily housed by the State in hotels or are staying longer with their families. Those who can’t buy are renting longer or are being pushed out into the suburbs. Those who build properties are finding the cost of building prohibitive.”
He said house prices nationally are still 35pc to 40pc behind the peak of 2006. Second hand homes in many areas of the country are being sold for substantially less than the cost of new builds. And in the Greater Dublin area the majority of building is happening in areas which can command higher sale prices.
“Social change of the nature currently happening as a result of the housing crisis should not happen as a by-product of policy. We need a definitive whole of Government approach planning cohesively and thoroughly for a sustainable property market.”
IPAV’s document questions the policy of NAMA in continuing to sell large numbers of residential units to foreign investment funds and says consideration should be given to NAMA supporting Irish governmental institutions such as housing agencies in acquiring properties.
It also calls for a full Cabinet position for housing and states: “The prolonging of the housing crisis is not helped by the current administrative and political structure where Government departments focus on the issues from a perspective of individual departmental or ministerial responsibility. Housing policy is so critical to the social and economic wellbeing of any society, but particularly one such as Ireland with severe legacy effects from the financial collapse, that it needs a whole of Government approach. We would encourage the new Government, whateverform it takes, to appoint a full cabinet minister with responsibility for the housing sector.”
It also recommends the setting up of a consultative Property Council, comprised of all stakeholders to advise the new Minister.