Paul Murphy (Dublin South West, Socialist Party)
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78. To ask the Minister for Finance his views on the desirability of house price increases; if the policy of his Department should be to encourage or discourage increases in house prices; and if his Department conducts assessments of the likely impact of its policies on house prices. [9656/15]

Michael Noonan (Limerick City, Fine Gael)
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My Department closely monitors movements in residential property prices and their potential impact on the economy. As regards recent trends, according to the Central Statistics Office, national residential property prices fell by 1.4 per cent between December and January, and are up 15.5 per cent over the 12 months to January.  It is too early to say whether the recent trends mark a break from the pattern of property price inflation over the past two years.

Regarding the rise in prices in Dublin and other urban areas over the last year, this is a consequence of an inadequate supply response to growing demand. As the Deputy will be aware, it is Government policy to address barriers to the supply of residential properties which should have the effect of reducing upward pressure on prices.

Under Construction 2020, the Government has set out the strategy for addressing issues in the property and construction sectors. The strategy involves ensuring that any critical bottlenecks that might impede the sector in meeting residential and non-residential demand are addressed. It incorporates 75 time-bound actions encompassing the development of an overall strategic approach to housing supply, identifying and implementing further improvements in the planning process to facilitate appropriate development, and seeking to improve financing options for development and mortgage provision.

By addressing the impediments to the viability of development projects this should lead to a speedier realignment of supply with demand and to greater price stability. This will improve affordability and support our future growth and our national competitiveness.

More generally, there can be winners and losers from rising house prices. For those intending to purchase a house, rising prices can negatively affect their capacity to purchase their own home. This may negatively affect mobility including of skilled migrants, potentially harming our economic competitiveness.

On the other hand, for those who own a house, property price increases are associated with a number of positive effects such as a wealth effect which may encourage consumption. Also, higher prices may entice more property owners, including those previously in negative equity, to sell their home and trade up, bringing greater liquidity to the property market. In addition, increasing house prices improves the value of assets held on banks' balance sheets.