Talking Property Parents who help their children to purchase property are making it a more expensive market for everyone else, writes Alan Cooke

In the board game of Monopoly there is a golden rule - you cannot help another player by giving them some of your cash. It's a sensible rule that ensures every player in the game operates strictly in accordance with their own resources.

In Monopoly, both the price of every site and the cost of everything that can be erected on each site are fixed, so we know we are not dealing with the real market.

However, the rule brings a sense of order to this fixed "market". That the rule exists in a fixed market, even an imaginary one, should be a lesson to us.

Of course, the real property market operates to different rules, under which nothing is fixed and everything is negotiable. Unlike Monopoly players, real home buyers negotiate the price of the properties they purchase. Although in a strong market it may seem unlikely, buyers in concert make the market for the available properties and, collectively, if unconsciously, set the level of sale prices.

The most obvious case where this is evident is at auction, but it happens also with other methods of sale. Even if individual buyers are not aware of it, their collective buying strength sets the prices fetched for all properties.

For a moment let's presume that every first-time buyer had to operate in the market according to Monopoly rules. What would be the biggest difference? Okay, the price would be fixed - which automatically means we are not talking reality. However, other factors are relevant. For instance, could such buyers borrow? In the real world cash borrowed by way of a normal mortgage arrangement has always been part of the "real money" available to make the market and this position holds in every open real estate market.

What could first-time buyers not do if complying with Monopoly rules? They could not accept cash from other sources, such as excess borrowings or cash from other players, even "players" not currently in the market for property.

The effect of such a rule would be to eliminate from the market huge amounts of cash that are at present artificially boosting the price of homes in this particular sector of the market, to the detriment of first-time buyers as a whole.

If every Tom, Dick and Mary is handed €25,000 or €50,000 or €100,000 by their Celtic Tiger parents, what happens? Available resources are used to buy the available product - that is a simple but realistic view of the economics governing the property market. The result: homes bought by first-time buyers increase in value (economic speak) or cost (real speak).

While there are other factors at play, such as borrowing in excess of traditional criteria and a partial switch in preference from new to second-hand homes, this extra cash is undoubtedly one reason that inflation in house prices for first-time buyers - at 5.6 per cent to date in 2005 according to the latest Permanent TSB/ESRI figures - is more than twice that for other buyers, at 2.6 per cent.

No one is advocating that the Government steps in and sets new ground rules to prevent parental cash gifts - that would be constitutionally and practically impossible. However, we should not always look to Government to solve our problems and the solution to this particular difficulty partially lies within our own grasp.

We should, as a successful nation, spend our money wisely. We should question whether parents who are willing to "help" their offspring with substantial cash gifts to facilitate the purchase of a home actually help or hinder first-time buyers as a group.

In the heat of negotiation, it is an unusual first-time buyer who will not put every available cent on the table to secure the home they want. Thus the money secured from parents goes into the pockets of property sellers, as prices rise, and first-time buyers are the only group to suffer as a consequence.

It is surprising that parents are doing this in such numbers and even more surprising that officialdom does not see the causal link between this extra money, which is artificial in relation to the first-time buyer market, and higher house and apartment prices in that market.

No one wants to stop parents being generous to their offspring. However, the old adage of being cruel to be kind may be of some relevance if one looks at the broader picture and it's time we realised that, by the effort to help their offspring to buy their first home, parents are collectively making it more expensive for all young people to do so, ironically including their own offspring.

The impact of these most generous personal gifts can be counter productive, at macro level, to the very intention that gives rise to them in the first place - housing affordability for first-time buyers.

Alan Cooke is chief executive of the IAVI