The Department of Finance continues to monitor developments in the construction and housing sectors with a view to identifying potential macroeconomic risks. The biggest such risk is a continuation of the present situation, in which supply falls significantly short of demand. If left unchecked, this shortage could increase affordability pressures, damage our competitiveness and harm our ability to attract investment. Due to the seriousness of the issue, housing supply is specifically listed as a domestic macroeconomic risk in the Economic and Fiscal Outlook published as part of Budget 2019. As such, it is accorded the highest priority within my department and in government more generally.
In response to this challenge — and in addition to the measures being implemented by my colleague the Minister for Housing, Planning and Local Government under ‘Rebuilding Ireland’ — Budget 2019 contained initiatives aimed at increasing the supply of new homes. In 2019, a total capital investment of €1.4 billion will be made in housing. A further investment of €310 million over three years will be made for delivery of affordable homes through the Serviced Sites Fund. Budget 2019 builds on actions taken in Budget 2018, which included the creation of Home Building Finance Ireland (HBFI), increases in the Vacant Site Levy and an increase in the rate of non-residential stamp duty.
The only long-term solution to inflation in both the owner-occupier and rental markets is to increase supply. Recent figures on new home completions released by the Central Statistics Office, show that we continue to have significant year on year increases. New home completions increased by 33 per cent in the 4 quarters to Q3 2018, to 17,161. Statistics on planning permissions and commencement notices are similarly positive. Planning permission for 26,855 new units was granted in the four quarters to Q2 2018, up 39 per cent year-on-year. Commencement notices – a measure of housing starts - increased by 20 per cent in the 12 months to August 2018, to 20,371. The Department of Finance will continue to monitor developments in the housing sector in the context of maintaining our strong economic growth.