Ciarán Lynch (Cork South Central, Labour)
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Question 19: To ask the Tánaiste and Minister for Finance his views on the International Monetary Fund's report that property here could be as much as 32% over valued, particularly with respect to the high levels of lending by Irish banks to the residential property sector; and if he will make a statement on the matter. [15598/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have noted the IMF report and it is important to be aware that in relation to the Irish housing market there are some significant variables of specific relevance to Ireland such as household formation and flows of immigration that were not included in the technical model. While this is acknowledged by the IMF it does mean that their analysis is not a wholly representative picture of the Irish housing market. As I said in response to a priority question earlier today, house prices have fallen when inflation is taken into account. In other words we have already seen a significant price reduction, which has resulted in a fall in house prices of nearly 15% in real terms.

The price adjustment in the housing market alluded to above, when combined with the measures I took at Budget time on stamp duty and mortgage relief, is making house purchases more affordable for first time buyers. The April EBS/DKM affordability index shows that the proportion of net income devoted to mortgage payments for a first time buyer working couple has decreased from 26.4% in December 2006 to 22.4% in January 2008.

The rate of growth of mortgages has cooled substantially over the past year. Annual year-on-year growth for February fell to 12.3%, a 14 year low, from 22.9% a year previously. Both the Central Bank and I have highlighted the need for borrowers and lenders to factor into their financial decision-making the prospective impact of potential changes in the future economic and financial environment, including the impact of higher interest rates. I fully support the vigilance of the Central Bank and the Financial Regulator on the issue of personal credit and mortgage debt and in reminding both borrowers and lenders of the need for responsible behaviour. Finally, as I said earlier the underlying demand for housing is solid and as more confidence returns to the market over the coming months the fact that there is now better value will impact on the market.