Tuesday, 27 May 2014

Questions (23)

Richard Boyd Barrett

Question:

23. Deputy Richard Boyd Barrett asked the Minister for Finance the specific measures he is considering or tools he has at his disposal for preventing the emergence of another property bubble, in view of the dramatic rise in rents and property prices in Dublin and other urban centres and given the macroeconomic threat potentially constituted by such developments; and if he will make a statement on the matter. [22280/14]

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Written answers (Question to Finance)

By way of background, I note that private rents - as measured by the Consumer Price Index - rose nationally by just over 9 per cent in the 12 months to April of this year. However, this follows a fall of over 25 per cent between 2008 and late 2010. The Private Residential Tenancies Board's rental index, which provides a geographical breakdown of trends in the residential rental market, shows that monthly rent levels were up by 7.6 per cent on a mix-adjusted basis in Dublin in the year to Q4 2013. However, rents in Dublin still remain more than 15 per cent below their level in Q4 2007 (the peak in Dublin), with rents outside Dublin down 25 per cent over the same period.

In the year to March, residential property prices, at a national level, increased by 7.8 per cent according to the latest available residential property price index from the Central Statistics Office. When assessing the recent pick-up in house prices it should be remembered that residential property prices fell by just over 50 per cent from peak-to-trough and that residential property prices nationally are still 46 per cent lower than their highest level in September 2007. In Dublin, residential property prices as measured by the index remained unchanged in March and were 14.3 per cent higher than a year earlier. As a result, Dublin residential property prices are currently approximately 50 per cent below their peak in early 2007.  This is the background against which any appreciation in house prices must be assessed.

The Deputy will also be aware that the property bubble up to 2007 was concurrent with a dramatic and unsustainable increase in mortgage lending. As indicated in the recently published Construction 2020 Strategy: A Strategy for A Renewed Construction Sector, mortgage lending decisions must be undertaken on a sustainable and prudential basis by financial institutions and conform fully to regulatory requirements, both in relation to the financial institution itself, and also with regard to the safeguarding of the borrower's interests. My Department is party to a range of actions in the Strategy which addresses among other issues: housing supply, with a particular focus on planning issues; appropriate and sustainable development financing; transparent and sustainable mortgage lending; the application of the tax code to the construction and property sectors; as well as addressing legacy issues associated with the property bubble. The Deputy will find these actions detailed in the Construction 2020 Strategy publication.

In summary, I wish to assure the Deputy that my Department will continue to closely monitor developments in the property and rental markets. I am also satisfied that actions set out in the Government's Construction 2020 strategy represent a comprehensive response to the challenges facing the property and construction sectors.