Professor Philip Lane:

We look at house prices on an ongoing basis. House prices move around a lot more than the cost of building and there are all sorts of demand factors. Income levels change as the population changes and interest rates and rents change. These are the factors that move the price of houses but we look at the prices of houses that have been built, while the Senator asked why certain types of houses were not being built. House prices are one issue but the supply of housing is a different issue, as is the mix of housing that is built. We have to ask if the mix of starter homes outside Dublin is where it should be, compared to the mix in Dublin, and there are issues around apartments versus trophy homes. We have a good track on the price of houses but that is a separate issue.

Affordability is affected by constraints in the construction sector but there has been an increase in activity. This year there will be a 17% increase in construction on last year. Given the number of planning permissions, we are looking at another 13% next year. There was an increase in 2018 too but this is all from a low base. The collapse in construction was huge and we went from overbuilding to almost zero. This year we will get back to 23,000 homes built and we think there will be 27,000 next year. These figures are still below where they should be but the construction sector is responding.

That takes time, which is why we are in this difficult situation in terms of the mismatch. So many people are either homeless or are renting when they would prefer to buy. When they do attempt to buy, the type of home they want is not available. I know that this is of major concern to the Oireachtas and the Government, as well as to the Central Bank but it will take time for the situation to improve. There is a lot going on but the situation will not be transformed overnight.