Jun 1st, 2008 by Conor McCabe
That’s how much Irish people have spent in the past two and a half years in buying houses and apartments so they can rent them out to others. It adds up to 60,277 units, with an average mortgage of €260,215 for each one. First-time-buyers spent €19.168 billion on mortgages over the same period, on 83,146 housing units - an average mortgage of €230,534.
These figures have bypassed Irish “investigative” journalism, where the entrails of chickens are read along with tea-leaves and the pavement cracks on Talbot Street in order to conclude that rents are going up as more people opt to rent rather than buy.
It is true that sales from first-time-buyers are dropping, but nowhere near enough to make a dent in the amount of people buying houses as rental concerns.
According to the Irish Banking Federation, in the first quarter of this year, 4,329 mortgages were sold to first-time-buyers - a drop of 2,521 on the previous quarter. However, at the same time 3,801 mortgages were sold as “residential investment lettings (RILs)”, and in the previous quarter (2007 Q4) there were 4,925 mortages sold as RILs. The amount of rental stock continues to increase, and at a rate completely out of proportion to demand. Not only that, people are buying these housing units with mortgages of such an extreme cost that it is not possible to make back one’s investment through rental income.
So, even if every single potential house buyer decides to move out of the family home and rent while s/he saves the necessary 10% deposit - and not stay at home where, presumably, they would be able to save for that deposit that little bit easier - the constant monthly increase in rental stock is such as to easily absorb any such demand. and this is before factoring in ten years of overstock in the housing market anyway.
When Brian Cowen speaks of the Irish entrepreneurial spirit, he is speaking about these investors/speculators in rent. Cowen, as finance minister, did nothing to tackle the various tax breaks and financial incentives that made investment in housing such a tempting prospect - he wasted his time in finance, where he could have guided some of that €15.685 billion borrowed during his time as minister into business start-ups and other such sustainable ventures. No. Government financial policy was focused on keeping property going. not only that, the focus has been on property construction and speculation. The idea of housing as, well, somewhere to live, has been fucked in the bin in favour of speculation betting slips.
From 1997 to 2007, there were 436,786 new housing units bought in Ireland with Irish mortgages. However, there were 685,988 housing units built, leaving a shortfall of 249,200 new housing units for which no mortgages have been raised. When this figure is cross-referenced with the 2006 census, as well as the written reports from the census renumerators, it fits easily into the figure of around 266,000 empty housing units in this country. The evidence is overwhelming. Fianna Fáil took the sound economic work of successive Irish governments, from 1982 to 1997, and pissed it against the wall - pissing, that is, out of the Galway tent, as opposed to outside the tent, pissing in.
The ten-year period has been a wasted opportunity as far as developing and encouraging genuine entrepreneurial spirit goes, a period that has seen billions in loans invested in that most static of enterprises: property. The financial links between Fianna Fáil and Ireland’s property/construction interests are so glaring - indeed, flaunted - as to ask whether there is a symbiosis is a facile and demeaning exercise.
Ireland HAS to break away from property as the magnet for business investment. Government policy has led to the current state of affairs, and government policy can wean the economy away from it.
The political will is simply not there - both Fianna Fáil and the PDs are in bed with the construction industry - but that shouldn’t stop the rest of us from making clear what is going on.
€15.685 billion in 2½ years, spent on rental white elephants.
Such wasted business opportunities.
But such great profits for construction.