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The Home Choice Loan scheme will aid developers more than most first-time buyers, while proving bad news for those trying to sell their houses
Sunday, November 02, 2008 By Jennifer O’Connell
It’s the frustrated buyers I feel for.

I’m not talking about Joe Plumber-turned-Taxi Driver who can’t get a mortgage to buy the €285,000 house of his dreams.

He’ll be fine now, thanks to the government’s brilliant scheme to lend money to people who have been turned down by all the prime lenders, so that they can buy properties costing five times their annual income that are all but guaranteed to be worth substantially less by this time next year.

No, the buyers I feel sorry for are those who reportedly had their dreams of living in a ‘‘Parisian-style’’ block of ‘‘luxury suites’’ in north Dublin, complete with access to a personal chef, chauffeur, masseuse, butler, maid, shopper, trainer, helicopter and private jet, snatched away last week, when the postman turned up with an envelope containing their returned deposit.

Only eight months ago, 250 putative buyers, lured by the promise of their own glass pyramid and a private staff to rival Madonna’s, gathered in the great hall at Clontarf Castle to hear Gerry Ryan rhapsodise about this ‘‘gloriously appointed emporium of luxury’’.

So thick was the air with the scent of Dom Perignon and the sense of entitlement, you could have sworn it was 2006.According to one report, only 18o f 52 apartments remained on the market just five days after the launch.

But eight months is a long time in the property game and, for awhile now, the site of this luxurious development at 119Howth Road has been suspiciously silent. Last week, buyers trying to access information via the MyHome.ie website were met with a curt ‘‘this development is not currently available’’, and newspaper reports suggested that buyers had had their deposits returned.

In the cold light of a recession, I suppose the idea of an apartment that came with its own Louvre-style glass pyramid, personal shopper and onsite masseuse must have seemed a bit, well, daft. Perhaps even the developers began to realise that if ‘‘all mod cons’’ had come to mean a private jet alongside the standard set of brushed chrome taps and Miele appliances, then the law of diminishing returns probably applied. Maybe the buyers simply saw sense and realised that €691,000 really is a lot of money for 815 square feet of what your mother would still have insisted on calling ‘‘your flat’’.

Either way, the development - like so many others around the country - seems to have become a victim of the ‘‘temporary period of adjustment’’ the property market is undergoing. If you’re not clear what this temporary period of adjustment means, think of it as a giant Bermuda triangle, into which all the country’s house buyers - who, only two short years ago, were to be seen rolling out their sleeping bags up at home launches and weeping outside auction rooms - have vanished.

Luckily, the government has come up with a scheme to lure these buyers back out of the triangle and into the market. It’s called the Home Choice Loan scheme. Its purpose, ostensibly, is to give a leg up to first-time buyers who are bravely preparing to take a step onto the property ladder. It offers loans of 92 per cent, up to a maximum value of €285,000, to people earning €40,000 who can’t get a mortgage through more conventional means.

You might be forgiven for thinking that, a bit like in-house personal trainers and complimentary helicopter rides, the whole premise is a bit daft. All the prevailing wisdom suggests that houses are only going to get cheaper.

They may even fall to levels where people can once again afford them - this is a concept often known as ‘‘the market’’. If this were allowed to happen, then there would be no need for schemes like the Home Choice Loan.

Then there is the fact that buyers can only apply for this special government loan if they have already been turned down by at least one bank. Many will presumably have been turned down for the very good reason that the bank suspects they can’t afford the repayments; or because the house they want to buy is not worth the price they’re preparing to pay for it.

The government claims that Home Choice loans are designed to help people who can’t get mortgages because of the credit crunch. Again, this seems a bit bizarre - surely the whole purpose of the €460 billion state guarantee of the banks was to get credit flowing again?

Some members of the government have also claimed - and this is where it stretches credulity until it begins to resemble a pair of 7 denier tights in a size too small - that the system replaces the Local Authority Mortgage scheme and is designed to make a dent in the housing lists.

The Local Authority Mortgage scheme had a maximum earnings ceiling of €36,800; the Home Choice Loan scheme is only open to those earning €40,000 or more. And if the housing list is genuinely made up of people earning 20 per cent more than the average industrial wage, then our problems are much worse than we thought.

It simply doesn’t make sense. Unless, of course, you don’t believe that the scheme is really designed to help first-time buyers; unless you harboured a suspicion that the real beneficiaries were, let’s say, the country’s developers.

Because the key thing about Home Choice Loans is that they will only be available on new builds. The rationale offered for this is that 70 per cent of first-time buyers opt to buy new builds. This is like saying that since over 50 per cent of the country’s population lives in Leinster, only homes in Leinster should be included. Like so much else about this scheme, it seems about as sensible now as using chauffeurs and glass pyramids to try and flog apartments.

But this scheme is not just imprudent - it’s unfair too. According to Davy Stockbrokers, there are around 40,000 unsold new homes on the market. But, according to Daft.ie, there are roughly 34,000 second-hand homes for sale for under €300,000. It is the owners of these homes who will be the real victims of this pointless and indefensible initiative.

As the furore over the decision to abolish the automatic entitlement of the over-70s to a medical card faded, the disquiet over the Home Choice Loan scheme bubbled over last week. On internet forums like the outspoken thepropertypin.com, a campaign was under way to make a complaint to the EU about the anti-competitive nature of the scheme.

Our national determination to own the roof over our heads and the polished porcelain tiles under our feet has been responsible for some harebrained initiatives in recent years. But history may yet prove this to be the daftest of all.

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