A Sinn Féin plan to drive down house prices in Dublin would make banks think twice about issuing mortgages and push many homeowners into negative equity, the Taoiseach has warned.
Leo Varadkar was responding to comments from Sinn Féin president Mary Lou McDonald that, if elected, her party would like to “get prices as low as we feasibly can”, suggesting a target of €300,000 in Dublin – a figure around a third below the current average price in the capital.
In an interview with the Irish Times, Ms McDonald rejected that the notion that seeking a house price slump would be politically dangerous, insisting “the far greater political danger is that we have still an entire generation for whom homeownership is a dim and distant fantasy”.
Mr Varadkar was asked about his rival’s remarks as he spoke to reporters in Dublin on Wednesday.
“To be honest, I’m a little bit taken aback to hear those comments,” he said.
“I’d be interested to know from Mary Lou McDonald and Eoin O Broin (Sinn Féin housing spokesman) how they would propose to bring average house prices down to €300,000 in Dublin – I’m not sure they have really thought about it to be honest.
“That would have significant consequences, it would put a lot of people into negative equity, particularly the vast majority of people who have bought their first home for the first time in the last couple of years.
“And also it would send a message to the banks, because if banks and lenders hear that the potential next taoiseach wants house prices to fall by that much, they will think twice about issuing mortgages to people against assets that are going to be worth less.
“And I really feel that while I understand the intention behind Mary Lou’s comments – we all want housing to be more affordable – people are really listening to what she says now – bankers, lawyers, financiers, investors.
“And if the message she sends out to lenders is that if you issue a mortgage to somebody, I’m going to try and make the collateral of that worth less, the message then is issue fewer mortgages and put up interest rates.
“I’m not sure if she fully appreciates that she’s now in a position where what she says really matters. There’s a transition you have to make from opposition to government and a transition you have to make from minister to taoiseach.
“I understand being on the wrong side of that. I just think Mary Lou needs to think more about how things she says about investment, about tax, about asset prices, house prices, how that can actually hurt people.
“And, you know, I wouldn’t like to see huge numbers of people fall into negative equity. And I wouldn’t like to see banks being afraid to give first-time buyers mortgages or putting up the interest rates as a result factoring in a potential fall in house prices.”
Mr Varadkar said a better way to achieve more affordability in the market was to work to ensure incomes rise at a faster rate than house prices.
