Greedy Builders
According to the Irish Times, Tom Parlon and the greedy Builders Federation have welcomed the bringing forward of the budget. Tom Parlon is quoted as saying that the Government should help first time buyers to borrow their deposit. First time buyers are already exempt from stamp duty and the fact that banks have returned to giving 80% deposits is something that should be welcomed, not something that requires the Government to bail out the first time buyers. Not having 100% mortgages available caps what people can spend and dampens down the price increases we saw in the early years of this century. What Tom Parlon is really asking for is the Government to bail out the builders. In an era where couples happily spend about thirty thousand on their wedding, the Government should not be made the fall guy to bail out the builders. If the builders want to entice frist time buyers into the market so badly, why don’t they reduce the prices of their houses rather than asking the Government to shore up the difference between the purchase price and the mortgage amount available. Why don’t they lend the difference to the first time buyers rather than expecting tax payers money to line their pockets? On Tuesday’s RTE nine o’clock news Tom Parlon was quoted as saying he believes that there are thirty thousand buyers holding off entering the market. There are also estimates that there are forty thousand unsold houses and about one billion in VAT tied up in these unsold houses. Some simple figures then. Thirty thousand buyers. Forty thousand houses. Even a child in primary school can subtract thirty from forty. Forty thousand (supply) minus thirty thousand (demand) equals ten thousand houses. So, still an excess of supply of ten thousand houses.
Tom Parlon should not be calling on the government to bail out buildres when there is an excess of supply. An excess of supply over demand means prices still need to fall further. If the builders reduce their prices then the first time buyers will probably enter the market. Tom Parlon’s proposed measures would keep the market artificially inflated. To what good? So that the builders can improve their cash flow and start building again? If the builders start building again, they will only increase supply yet again and we’ll get deeper into the hole. The builders rode the property wave when it was riding high. They kept on building, regardless of whether there was going to be enough demand. If they want to sell the houses, they need to correct their own prices.
