Update: Monitoring of House Price Inflation 27th May 2014

QUESTION NO:   182

DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)

by Deputy Bernard J. Durkan

for WRITTEN ANSWER on 27/05/2014  

 To ask the Minister for Finance the extent to which he and his Department have noted house price inflation; if such a trend is likely to cause economic disruption; and if he will make a statement on the matter.

REPLY.

My Department continues to monitor developments in the property and construction sectors to ensure that the property market makes an appropriate contribution to wider economic performance.  

When assessing the recent pick-up in house prices it is important to remember that residential property prices fell by just over 50 per cent from peak-to-trough and residential property prices nationally are still 47 per cent lower than at their highest level in September 2007.   While much of the recent attention  has focused on the Dublin market, prices in the capital are currently close to 50 per cent lower than at their peak in early 2007.  It is against this background that the recent appreciation in house prices must be assessed.

In addition, it should also be noted that there are indications that  a large percentage of residential property transactions are currently taking the form of cash purchases and mortgage lending is still at a small fraction of pre-crisis levels.    Figures from the Irish Banking Federation show that the value of mortgage lending for house purchase in 2013 stood at €2.4 billion, or just 8 per cent of the value of mortgage lending in 2006.

While the demand for housing is a function of a number of economic and demographic factors, it is clear that current levels of housing output are running below estimates of medium- to long-run requirements as, for example projected by the ESRI and others, based on underlying demographics and other factors.  

Therefore, and as outlined in the Medium-Term Economic Strategy and Construction 2020 – a strategy for a renewed construction sector, the Government is working to address the challenges in the property and construction sectors.  This includes the development of an overall strategic approach to housing supply, identifying and implementing further improvements in the planning process to facilitate appropriate development, and seeking to improve financing options for development and mortgage provision.