1. I understand why you propose making the family home sacrosanct, but you are assuming that anyone who loses theirs is playing the game honestly. One of my companies has just lost a useful chunk of money; a client put itself into administration, pulled the plug, then sold itself to a new owner, debt free. Completely legal, but not even remotely honorable.

    If your notional investor can't lose the house, they can play for the highest stakes but lose nothing. They could even refuse to pay the mortgage and not be evicted. Alternatively, put any profits from investment straight back into the house (where it can't be touched) so that nothing claimable from them.

    The banks certainly demand to much surity in order to eliminate any risk to themselves, but protecting such a large, valuable thing runs the risk of them never lending to anybody who owns a house. Mortgages are not nice, but are necessary.

    A better solution would be for the IFA to put a maximum limit on the amount that a bank can claim back if an investment or loan goes sour – a sort of reverse leverage effect. That way, you can limit your risk to keep the house safe, or chance the whole lot. Your call.

    • Mick,

      I guess I could have made that article longer to cover issues like the one you’ve raised. I would envision a new legal status bring set-up specifically for a family home but not applicable to any other asset. It could not be traded for profit during the lifetime/s of the parent/s. If, as I suggest, it must never be allowed to represent a loss then it must also never be allowed to show a profit for the owner/s.

      In the event of the need to move to another place, the family home could only be sold as a family home and could not be converted to a status of property asset. The only time that can happen is on the death of the surviving parent. Their last will must contain the name/s of the beneficiary/s and it is at this point that a decision can be taken to sell it at market values. Again because it would be in a named special category, the sale could have its own terms and conditions such as a special tax bracket etc.

      A home owner who is also in business might put himself into administration but the family home he or she lives in cannot be touched either by the owners or their offspring. In this way it represents neither a business asset nor a liability. Banks couldn’t accept the deeds as collateral as financing for the business. As to financing this category of house, the Government could set up a special State bank purely to perform this function thereby by-passing the private banks. A fixed low interest rate would facilitate purchase planning in this regard.

      I have no doubt that setting something like this up would pose many challenges but my thinking is that the family is the core unit of society so my proposal is societal rather than financial. Surely it can’t be beyond our collective imaginations to devise such a scheme. It would cure many basic issues that Ireland currently faces because, if you don’t know, we are rapidly returning to the ridiculous property price inflation of ten years ago and rental prices in Dublin yesterday went higher than they were during the Celtic Tiger.

      There is an excellent article from one of our brighter economists from last week that will explain this better:


      • House prices on this side of the Irish Sea are no less ludicrous. Part of this has to be attributed to the crazy low interest rates that we have had for so long, so I can't see that a tax-payer subsidised low interest rate for housing would help. The only advantage (and it's very questionable) is that if you have to sell your family house to move into a care home, the high value of the property offsets the ruinously expensive residential costs. Then of course you are into the whole argument about not being able to leave an inheritance to your children.

        There are already schemes over here to fiddle with the property market, like housing association shared ownership, and subsidies for first time buyers. A few people benefit from these, but for most it's just jacking up the cost of both houses and tax.

        I wish that family was still the core unit of society. The idea of a married couple with two or three children (the norm of my childhood, and probably yours) seems to be offensive to the bleeding-heart liberals that force their policies on us.

        My feeling is that you are approaching the problem from the wrong direction. The world seems to be all about life on credit, and anything that could be seen to put a crimp on that is an anathema. Until the political and financial worlds value (literally and figuratively) savings, planning ahead and familial stability, the individual is going to become more exposed to the massive power of big institutions.

        • A tax-payer subsidised low interest rate for housing would help the taxpayer mostly. The most crippling debt for newly marrieds is always the mortgage. And the family is still the core unit of society regardless what the bleeding-heart liberals may want to think. Without the family we won’t have future generations of stable working people to pay the future pension needs. 

          Schemes to fiddle with the property market are everywhere but I am advocating laws rather than schemes. In Germany and France for example, house prices are not allowed to bubble. In purely economic terms there are two basic laws of buying and selling. The seller must cost the item they have for sale and in property terms, a quantity surveyor does that. His job is to cost the materials, time and labour and the value of the land. This is the cost price for the builder. The other half of this equation is, of course, the sell price the market will bear. In this regard, I would make the family home a separate entity not governed by market forces. It must be a cost-plus arrangement with a built-in profit for the builder. It would reflect the costs at the time of build plus a reasonable margin of possible twenty per cent for the builder/developer. This much can be done.

          As regards credit, that is what the bank is actually selling you when you go for a mortgage. They are selling an obligation that enslaves you to them via debt. That is the vicious cycle I’d like to break. Banks in the main are just blood suckers on society and over here, we had to bail them out when their recklessness threatened to destroy the economy. Having shown their true colours I would have thought that society would demand safeguards for the individual against the banking system. In this regard, what I am proposing is the State safeguard for the family home as an institution while not interfering with the economy at large. 

          If we don’t then we are domed to see another bank meltdown when the current bubble inflates short term before bursting again. Either way, the banks win and society looses! Which then is the greater evil?

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