Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

20. To ask the Minister for Finance the extent to which he is satisfied that the economy here can grow sufficiently in the coming year to meet or exceed the budgetary targets set in budget 2014; if any action is needed to address inflationary tendencies in the housing sector; and if he will make a statement on the matter. [49209/13]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

My Department published updated macro-economic and fiscal forecasts with Budget 2014 on October 15th. These projections show that Ireland remains on track to meet its obligations under the Excessive Deficit Procedure (EDP), with an underlying general government deficit of 7.3 per cent forecast for 2013, improving to 4.8 per cent in 2014 – both figures within the deficit ceilings set by the ECOFIN Council in late 2010. Current projections show we remain firmly on track to bring our deficit below 3 per cent by 2015.

Nominal GDP – the metric used for calculation of both our debt and deficit ratios – is expected to increase by 1.2 per cent this year, with the rate of growth set to pick-up to 2.9 per cent next year and to 3.7 per cent in 2015. These growth forecasts are obviously subject to a number of risks, emanating from both external and internal sources. However, I have been encouraged by developments of late on both fronts. High-frequency data for the Irish economy over the third and fourth quarters so far are broadly positive and we are beginning to see increasing signs of recovery in key trading partners, with growth accelerating in both the US and UK in the third quarter.

Regarding house prices, it is worth remembering that residential property prices in Dublin fell by around 60 per cent from peak to trough and residential property prices in Dublin are still 51 per cent lower than at their highest level in February 2007. It is against this background that the recent appreciation in house prices in the capital must be assessed. Although strong growth has been seen in recent months, it is coming off a low base.

It should also be noted that the previous housing bubble was accompanied by a dramatic increase in mortgage lending. The same cannot be said of the recent appreciation in house prices, with a large percentage of transactions taking the form of cash purchases. Figures from the Irish Banking Federation show the value of mortgage lending for house purchase over the first three quarters of the year standing at just €1.5b, or just 7 per cent of the value of mortgage lending over the same period in 2006 for instance. The same figures also show that lending for house purchase is essentially flat over the first three quarters of this year, when compared with the same period in 2012.

However, as I said in my Budget Day speech, I am aware that there are some supply limitations in certain urban areas. In light of this I introduced several measures to help increase the supply of suitable residential housing stock as part of Budget 2014. These included – subject to State Aid approval – the extension of the Living City Initiative, to include Cork, Galway, Kilkenny and Dublin and the broadening of eligibility criteria to include all buildings built prior to 1915. I also introduced the home renovation incentive, which provides an income tax credit to homeowners who carry out renovation and improvement works on their principal private residences between October 25th 2013 and December 31st 2015.

Finally I would point out that it is NAMA's expectation, at this juncture, that its funding will contribute about 4,500 houses and apartments in terms of new supply in the Dublin market in the period to 2015. This is a significant output in the context of current house completion levels in Dublin. In 2012 just over 1,200 new houses and apartments were completed in Dublin. In addition, NAMA is overseeing the rental by debtors and receivers of close to 10,000 residential properties nationally – mainly apartments in Dublin. NAMA is also overseeing the sale of houses in Dublin by NAMA debtors and receivers and has made over 1,200 properties available to local authorities to meet demand for social housing in Dublin.