Sir, – Conor Pope’s piece contains multiple perspectives on the challenges of buying a property in Ireland using a mortgage and renting a property, but alas the key thread connecting these challenges is not explained (“Ireland’s new squeezed middle: ‘Trackers were attractive for a long time but now we’re paying the price’”, People, March 30th).
The key connection between the European Central Bank’s (ECB) monetary policy of the last 15 years and its effect on prices is ignored. Fundamentally the ECB kept interest rates so low (by inflating the money supply over the last 15 years) to monetise government debt and spending. This inflated asset prices first and all prices later. This include residential property prices and all the inputs which go into providing these. In describing the ECB’s efforts to fight inflation, Conor Pope’s contributors appear loathe to point out that the ECB is the primary progenitor of the inflation.
The effects of this ECB induced inflation on property prices were not to the Central Bank of Ireland’s (CBI) liking and they tried to implement price controls on residential properties (their mortgage lending rules – by limiting the buying power of mortgage financed buyers – are effectively a price ceiling). This had two effects.
First, supply was choked off as builders could not build and sell properties for many years throughout the 2010s for a price which covered the cost of construction. This reduced the supply of both owner occupied and rental properties.
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Second, the CBI forced a large class of people who wanted to buy (but were limited by CBI rules) into remaining renters and causing further upward pressure on rents (we need not elaborate on the rent capping legislation and other ham-fisted State interventions which are driving private landlords out of residential property and reducing rental supply even further).
We see “Clare” in the piece mention that she could have a mortgage payment (my congratulations to her for displaying the work ethic, fiscal responsibility and discipline to be granted mortgage approval at such a young age) that is less than the monthly rents she sees in the market. This is purely down to the bifurcation the CBI has forced upon the market with their mortgage lending rules.
The CBI has determined that the likes of Clare should be renting because, in the CBI’s opinion, she must not be allowed to take out a mortgage that she would very likely consider a better deal for herself than renting.
There can be no sustainable solution to the issues facing us in housing without honest acknowledgment of the primary causes of the issues, for which see above. – Yours, etc,
DONAL ÓG O’CHAOIMH,
Naas,
Co Kildare.
