Dermot Ahern
Ceist:107 Mr. D. Ahern asked the Minister for Finance the rate of house price inflation at six monthly intervals from January 1994 to date in 1997; and if he will make a statement on the matter. [1082/97]
Written Answers. - House Prices.
Dermot Ahern
Ceist:108 Mr. D. Ahern asked the Minister for Finance his views on whether house price inflation over the past number of years has the potential for causing wage instability over the next four years; his views on whether it is acceptable that reductions in nominal interest rates should be so absorbed by rising house prices; and if he will make a statement on the matter. [1083/97]
I propose to take Questions Nos. 107 and 108 together.
Statistics in relation to house price inflation are complied by the Department of the Environment on a quarterly basis for both new and second-hand houses. The annual rates of increase for new and second-hand house prices from the first quarter of 1994 to the third quarter of 1996 are available, and are given in the table below. These figures show that house prices have risen significantly over the past two years. Notwithstanding this trend, inflation generally and wage trends in particular have remained quite moderate.
|
Year on year percentage increases in house prices |
||
|
New houses |
Second-hand houses |
|
|
1994 Q1 |
7.4 |
6.8 |
|
Q2 |
3.0 |
4.8 |
|
Q3 |
0.0 |
8.0 |
|
Q4 |
7.5 |
-0.3 |
|
1995 Q1 |
6.5 |
0.5 |
|
Q2 |
6.3 |
6.3 |
|
Q3 |
8.8 |
5.5 |
|
Q4 |
7.1 |
13.1 |
|
1996 Q1 |
4.9 |
10.0 |
|
Q2 |
10.5 |
14.8 |
|
Q3 |
17.7 |
18.2 |
I do not expect that the trend in house prices over the past number of years will give rise to wage instability given the very substantial reduction in mortgage interest rates since 1994 and the overall proposals in relation to tax reductions and wage increases in the new national agreement,Partnership 2000, for Inclusion, Employment and Competitiveness. In that context my Department has stated that it expects price increases over the period to 1999 to be just over 2 per cent per annum.
As regards the relations between reductions in nominal interest rates and house prices, I would point out that the latter are also affected by a wide range of other factors, including the high level of economic growth, demographic changes, the substantial increase in members employed in recent years and higher real incomes. As I indicated recently, I expect that the increases in stamp duty rates on the top end of the market will have a moderating effect on house prices.