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Residential Property Market

Dáil Éireann Debate, Thursday - 12 December 2013

Thursday, 12 December 2013

Questions (54, 55)

Terence Flanagan

Question:

54. Deputy Terence Flanagan asked the Minister for Finance the measures in place to prevent investors from creating a new bubble in the residential property market; and if he will make a statement on the matter. [53612/13]

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Terence Flanagan

Question:

55. Deputy Terence Flanagan asked the Minister for Finance the direction he has given to the banks to stop them encouraging investors to buy residential property; and if he will make a statement on the matter. [53613/13]

View answer

Written answers

I propose to take Questions Nos. 54 and 55 together.

Poor regulatory oversight of the activities of the banking sector has been identified as a key contributing factor to the difficulties faced by the country in the last number of years including the necessity for the external assistance programme which will conclude shortly.

The Deputy has identified specific concerns in relation to the potential for renewed activity by investors, facilitated by the banking sector in the residential property market. However, as Minister for Finance, I do not set commercial policy for individual banks, nor does the Central Bank. In a supervisory capacity, the Central Bank oversees and reviews bank practices and regulatory adherence.

The Deputy will be aware that this Government has undertaken a number of significant reforms in order to strengthen the regulatory framework for the financial services sector and to respond to shortcomings identified during the financial crisis.

The Central Bank (Supervision and Enforcement) Act 2013 was passed this year which enhances the Central Bank’s regulatory powers, drawing on the lessons of the recent past. It strengthens the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely prudential interventions. The Act also provides the Central Bank with greater access to information and analysis and underpins the credible enforcement of Irish financial services legislation in line with international best practice.

This Government has also implemented a series of measures which reflect the important role that the banking sector has to play in supplying credit and in doing so to support economic growth in the economy. As shareholders in the main banks, the Government's objective is to ensure that they are managed commercially so as to create and protect value for the taxpayer but also to ensure that they supply the credit lines necessary to sustain and grow the economy.

I am satisfied that the Central Bank is monitoring lending decisions of the banks. Among the applicants for mortgage credit, I understand that investors, who are already active and welcome in the market, do not necessarily compete for the same property types as borrowers of residential mortgages. As I have said recently, in the context of rising rents particularly in urban areas, new mortgage products targeted at the buy to let sector may assist in stabilising the situation and alleviating problems in the rental market. Many of the generous tax incentives that promoted activity in this area contributing to the previous difficulties are no longer available. It should also be noted that some of the investors are coming to the market as cash buyers and credit from the financial institutions is not an issue for these parties.

The Deputy can be assured that this is an area which the Department and the Central Bank will continue to monitor closely.

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