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‘If I was minister for housing’ … David McWilliams’s plan for €220k homes

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If economist David McWilliams were minister for housing he’d introduce “a site-value tax in the morning”, he told Irish Times political correspondent Jennifer Bray at the Summer Nights Festival on Monday night.

“You’d take lots and lots of flak”, McWilliams concedes “but you know being popular isn’t what it’s all about.”

“If you are sitting on a piece of land that you do not use, that is a waste. So consequently what we have to do, is we have to make it expensive to do that, and therefore what we do is what’s called a site-value tax, and we tax the site value and not the actual house”, he explains.

“I can tell you there hasn’t been an intervention in the housing market that hasn’t caused prices to rise in my lifetime”, The Irish Times columnist said, adding that he believes this is down to “inertia”. “It’s just this is the way we’ve been doing things for a while.”

“Land has been hoarded by landowners, and the reason they hoard land is that we have locked ourselves into a silly situation, whereby if you get planning permission it doesn’t have an immediate sell by date.”

“You’ve got to have a use-it-or-lose-it planning permission,” McWilliams said, which would put an end to land hoarding and “release lots and lots of land that’s now being planned into supply”.

“Probably the most criminal, architectural, urban blight that we have, is the fact that we have so many derelict properties. We’ve derelict properties when we have a housing crisis.” This, McWilliams said, is because there are no rewards or penalties for good and bad behaviour.

“Good behaviour is taking an old building and putting it back into use.” “Bad behaviour is taking a roof off a building, as we see all the time in Dublin and all around the country.”

McWilliams argued that we need to penalise inappropriate owners and “reward appropriate owners that bring things into use”.

McWilliams drew a comparison between the Covid-19 crisis and how the country “galvanised itself into an emergency footing in a very short period of time”. “I think that housing should be declared a national emergency and everybody should try to do their part in order to fix it.”

Developers and builders should be “brought into the tent. You talk to co-operative people. You talk to the banking sector and you say ‘listen we need to do this. We have a target and we’re going to put the State behind it’.”

Co-operatives offer another potential solution to the housing crisis, McWilliams explained. “Ó Cualann [housing development] is a co-operative … It’s not any great mystery. You pool your resources with the objective of creating a co-op that produces housing at the least price.” (A house with the co-operative, Jennifer Bray noted, could cost as little as €220,000.)

“And then what you also do, because everyone’s part of a co-operative, there’s actually quite a significant in-built community building, because everyone’s part of something. And if you want to leave the co-op and you want to move on, you leave the co-op and you sell your share on co-op. The point is it’s not based on land prices, so it stops land speculation and that’s hugely important”.

The Irish Times Summer Nights Festival, sponsored by Peugeot, is a series of online talks featuring Irish Times journalists in conversation with local and international authorities. It runs until Thursday July 1st.

Still to come in the festival are: Mary Lou McDonald in conversation with Kathy Sheridan; Chris de Burgh talking to Paul Howard; Maureen Dowd interviewed by Hugh Linehan; Gordon Brown and Roddy Doyle talking to Fintan O’Toole; Mona Eltahawy with Róisín Ingle; and Jo Spain talking to Bernice Harrison. A ticket covering all events costs €50, or €25 for Irish Times subscribers.

Full schedule and tickets from irishtimes.com/summernights.

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Could equity release be used to help more younger homebuyers?

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Younger first-time buyers could be given more financial help from the Bank of Grandma and Grandad, through the use of improved equity release products, a new report suggests.

The document written by Tom McPhail, of consultancy The Lang Cat, claimed that younger buyers are missing out because older members of their family are unable to satisfactorily tap into their property wealth.

Mr McPhail said: ‘Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations.

‘An equity release by grandparents of say £20,000 now, could be transformational for a 20 something struggling to raise a deposit and get on the housing ladder but would make only a very modest dent to the value of the grandparent’s house.’

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

The report acknowledged that equity release has endured a poor reputation in the past after customers suffered ‘severe’ financial knocks.

The sector has been criticised for encouraging people to take on debt, particularly later on in life.

There has also been other concerns about equity release, such as customers falling into negative equity where the value of a property is less than the loan taken out against it when house prices fall.

The report suggested that while the equity release sector has since begun to put ‘its house in order’, it is ‘still not perfect’ and some regulatory safeguards need to be strengthened.

It called for several issues to be looked at, including early redemption charges on equity release products.

It said that most providers apply a simple sliding scale of charges, for example 10 per cent in year on to 1 per cent in year 10.

However, it claimed that some providers apply an early redemption charge based on prevailing gilt rates at that time, putting customers at an ‘unfair disadvantage’.

This is because the fees are not transparent as there is no way a customer can know in advance whether they’d be liable for a charge and if so, how much. 

In the past, customers have also fallen foul of the small print on their equity release loans when it comes to early-redemption penalties – such as couples who must pay an exit fee unless both of them need to go into care.

The report also raised questions about interest rates on equity release products. It said providers should be consistent with their lending criteria and not move the goalposts after customers have taken out a loan, as this can make it harder for them to access a top-up loan in the future, potentially forcing them to remortgage. 

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

The report argued that equity release products could help people access their property wealth to help younger members of their family onto the property ladder.

Mr McPhail added: ‘Raising a deposit has become an increasingly significant barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations.

‘Releasing some of the equity in a property allows older homeowners to choose when and how they share their wealth with the younger generation.

‘This more targeted approach gives them greater control to use their assets to the maximum benefit at the point of need.’

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report's author Tom McPhail

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report’s author Tom McPhail

Equity release: How it works and advice

To help readers considering equity release, This is Money has partnered with Age Partnership+, independent advisers who specialise in retirement mortgages and equity release. 

Age Partnership+ compares deals across the whole of the market and their advisers can help you work out whether equity release is right for you – or whether there are better options, such as downsizing. 

Age Partnership+ advisers can also see if those with existing equity release deals can save money by switching. 

You can compare equity release rates and work out how much you could potentially borrow with This is Money’s new calculator powered by broker Age Partnership+.* 

 * Partner link

Jonathan Harris, of mortgage broker Forensic Property Finance, said: ‘Equity release has historically been viewed as a ‘murky’, high-risk sector, fuelled by minimal regulation, poorly-qualified advisers, only a handful of lenders and extortionately high interest rates.

‘Fast forward to today and we see a dramatically transformed sector, benefiting from strict regulation, highly-qualified advisers, multiple lenders and access to very competitive interest rates. 

‘Not surprisingly, equity release is now a viable and growing market for older borrowers looking to utilise the gains seen on property prices to bolster lifestyles, as well as pass on wealth to children when they need it.

‘Those considering equity release should make sure they understand the implications and involve family in any decision-making. It is always important to seek advice from suitably-qualified advisers.’

It comes as a separate report by Legal & General suggested that one in every £90 spent by retired Britons is funded by equity release.

It said that equity release funded an estimated £3billion in retirement spending last year, although it didn’t mentioned the money going to younger generations towards buying a property.

Instead, the report’s survey of 2,000 homeowners found that those with equity release have most frequently used the product to finance home improvements, at 26 per cent.

It said equity release is also being used to support costs such as medical expenses at 17 per cent, maintaining living standards in retirement at 16 per cent, and paying off personal debt at 16 per cent, for example paying off interest-only mortgages. 

It suggested that equity release is likely to play an increasingly important role in financing care-related expenses, with 19 per cent of prospective homeowners citing it as a consideration.

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Allianz Real Estate buys prime office building in Rome (IT)

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Allianz Real Estate, advised by Dils, has acquired an office property in the centre of Rome. The transaction, worth circa €175m, is one of the most important to have been carried out on the real estate market in Rome in recent years.

 

The building, consisting of eleven storeys, comprising nine above-ground and two underground, has a gross lettable area of circa 22,000m² and has undergone a major refurbishment, offering the highest environmental sustainability and energy efficiency standards (LEED Gold Certification). The strategic location, between the CBD and Termini Station, is enjoying great success, especially among corporate occupiers. 

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NCC sells Valby office scheme (DK)

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NCC is selling Kontorværket 1 office project in Valby, Copenhagen to Industriens Pension. The building will become biotech company Genmab’s new headquarters and will meet high environmental standards for both the building and the area. The transaction will be conducted as a company divestment, based on an underlying property value of approximately €81.9m (SEK875m). Transfer of the project and payment of the purchase consideration is expected to result in a positive earnings effect in the NCC Property Development business area in the first quarter of 2023.

 

“We are now selling Kontorværket 1, the first phase of our development project in Valby in the central parts of Copenhagen. Here we have developed property with an optimal infrastructure and appealing architecture, and I am pleased that Industriens Pension is now taking over,” said Joachim Holmberg, Business Area Manager, NCC Property Development.

 

Kontorværket 1 encompasses 16,000m² of lettable area and also includes a basement featuring a parking garage next to the building, with space for 280 vehicles and facilities for parking bicycles.

 

“This is an attractive and future-proof office property, located in an area with very good infrastructure, a motorway, a nearby metro and S-train station. The 15-year lease with Genmab fits well with our strategy as a long-term owner, and we expect the property to contribute a stable return for our members for many years to come. We look forward to welcoming Genmab’s experts in biotechnology,” said Soren Tang Kristensen, Head of Real Estate Investments, Industriens Pension.

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