The indices for private new house prices and house building costs measure different things. The house price index measures changes in private new house prices which reflect the supply and demand for housing. The national house building cost index relates solely to standard wage rates set by the National Joint Industrial Council for the Construction Industry and average market prices for construction materials and does not include items such as development land prices, planning and development levies, planning fees, legal fees, marketing costs or profits which would be reflected in house prices and any house price index.
Housing demand has grown phenomenally in recent years due to a number of factors, including strong economic growth, historically low interest rates, increasing employment, rising levels of real personal disposable income, and demographic changes, including high immigration and growth in the key household formation age groups.
The Government strategy to moderate house price increases is based, therefore, on increasing the supply of housing to meet demand. The Government has implemented a comprehensive range of initiatives to this end, and these measures are having effect. The trend in house price increases is moderating and record housing output was again achieved in 1999 with national new house completions up 10% on 1998. Significantly, in Dublin, where the supply demand imbalance is most critical, the increase in output was 12%.
