Dáil Éireann Debate, Tuesday - 9 November 2021
273. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which house price inflation here is likely to affect economic performance in the future; and if he will make a statement on the matter. [54723/21]
View answerMy Department continues to monitor all aspects of the property market, including the rate of house price inflation, on an ongoing basis. According to the most recent figures released by the Central Statistics Office, between July and August 2021, the national Residential Property Price Index (RPPI) increased by 2.2 per cent, while prices increased by close to 11 per cent in the year to August 2021.
These rises in residential property prices in recent months, while concerning, are likely due to increasing activity amongst potential home-buyers as public health restrictions were eased. Along with an unwinding of savings built-up during lockdown, demand has manifested in an increase in the volume of purchases of new homes, typically more expensive than second-hand homes.
While the Government is very conscious of pressures in the housing market, including the potential for a faster unwinding of excess savings and construction inflationary pressures due to global supply chain disruptions, the underlying factors driving house price inflation in Ireland at present are primarily due to insufficient supply.
The current inflationary pressures are also fundamentally different to periods in the past, such as the credit fuelled house price inflation in the years prior to 2008. Since then macro-prudential rules were introduced to the mortgage market to safeguard against the worst of potential shocks and operating with a constraining effect on the rate of house price inflation. That being said, the current imbalance in the housing market has the potential to impact on competitiveness and labour supply and thereby adversely affect our economic performance in the future.
To mitigate against these risks, the Government has put in place a suite a measures, including the recently published Housing for All strategy. The Strategy sets out an ambitious programme of housing delivery to meet the needs of our growing economy and population over the medium-term through both private and public investment. While cognisant of potential capacity issues in the sector, Housing for All also represents the most ambitious investment in social and affordable housing in the history of the State. The Strategy aims to increase housing supply by as much as 300,000 units by 2030 and an average of 33,000 units per annum. The result of correcting the current imbalance will be to ease the potential for house price inflation and improve housing affordability.
In this respect, I am encouraged by recent forward indicators of housing supply, most notably the high levels of housing commencements which show that in the 12 months to September 2021 there were 30,519 units commenced nationally, the highest in many years and a positive indication of future supply. Indeed, housing completions are also turning a corner, in spite of the challenges of the pandemic, with most economic observers now revising upwards their predictions for completions for 2022 and beyond. Reaching our target of 33,000 new homes per annum is the best response for our citizens and supporting the economy in the medium-term.
