Dáil debates

Tuesday, 13 June 2006

3:00 pm

Photo of Noel AhernNoel Ahern (Dublin North West, Fianna Fail)

I propose to take Questions Nos. 53 and 55 together.

I am aware of the house price affordability index referred to and also of the trend in affordability as measured by the index compiled by my Department to assist in monitoring developments in the housing market.

Despite increased house prices, affordability has remained relatively favourable. This is because of the substantial improvement in employment and incomes due to our economic success and the fact that large reductions in personal taxation have further boosted take-home pay. These factors, coupled with low interest rates and the uptake of longer term mortgages, have kept mortgage repayments relatively affordable. Also first time buyers are entitled to mortgage interest tax relief on higher amounts of interest, up to €8,000 in the case of a couple, for the first seven years of the loan. Nonetheless, borrowers and lending institutions should exercise care in regard to the level of new mortgages, particularly in the context of an upward trend in interest rates.

My Department's affordability index shows that mortgage outgoings as a percentage of net income are still less than in the early 1990s. The recent EBS index showed that the average proportion of net income required to meet mortgage repayments is well within recognised affordability criteria and within the limits applied by lending institutions in deciding mortgage applications. The affordability position improves further when measured on the basis of typical first-time buyer prices, longer-term mortgages and more representative levels of joint income.

The relatively favourable affordability figures help to explain why demand in the housing market continues to be very strong. Housing demand has been driven primarily by the strength of the economy and unprecedented population growth in recent years, particularly the very high level of immigration related to economic growth. In response, Government has taken action on a wide front to maximise access to home ownership, particularly through measures to promote adequate supply of housing to meet demand.

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