Two Dublin businessmen have come up with a proposal for a scheme to encourage more house purchases without costing the state any money.
Basil Good, joint owner of Isaac’s Hotel and Property Group, and former Dublin City Centre Business Association chairman Paddy Monaghan, believe their proposal is better than the one put forward by the National Asset Management Agency last week.
NAMA announced plans to sell 5,000 houses as part of a scheme where the agency will guarantee the purchaser against the value of their house falling by up to 20% over five years.
According to Monaghan, his scheme would actually bring in revenue for the exchequer.
Under his proposed Irish Residential Value Protection Scheme (IRPS), where a house is bought for €200,000, the insured risk would be 20% over three years, equal to €40,000.
The government would guarantee up to €16,000. The seller would put €14,800 on deposit with his bank for three years, which would be called on if the house value fell.
This money would be refunded in full plus interest after three years if not called on. The bank would have to put €5,200 into the scheme if the house value fell.
The purchaser would pay €111 per month for up to three years into a bank account to cover his/her share of the loss if called on, equal to €4,000. This would be fully refunded if not needed after three years.
Mr Monaghan argued that there is a financial incentive and benefit for all four parties to carry out the transaction, despite all four of them sharing some of the potential risk.
“The banks would see more mortgage business and it would help stop house prices from falling, which affects the value of loans they already have,” he said.
He argued that, while vendors were taking a risk with up to €14,800, they had a better chance of getting a sale through under the scheme.
Monaghan argues that his proposal was better than NAMA’s because the state was only carrying 40% of the downside risk, instead of all of it under the NAMA scheme. He also argued that this scheme could be available for all houses, new and second hand.
Monaghan and Good have put the proposal to a variety of industry groups, and to environment minister Phil Hogan and finance minister Michael Noonan.