Tuesday, 16 January 2018
Department of Finance
My Department produces macroeconomic forecasts twice a year. As part of the forecast process my Department produces a forecast for overall investment (gross domestic fixed capital formation), and in line with the national accounts approach, this involves forecasting the overall volume and price changes for newly built residential units. The sale of existing houses is not included in the national accounts as it is simply the change of ownership of an existing asset, though the value created as part of the sale process is included - for example, the conveyancing activity. As the Deputy will appreciate, estimates of price inflation for newly built units in the context of the national accounts framework are not the same as forecasts for overall house price inflation. With this in mind, the current forecast for price inflation of newly built units in 2018, on a national accounts basis, is 5 per cent.
In its annual review of residential mortgage lending requirements, the Central Bank concluded that both actual and expected price dynamics are heavily influenced by the current low levels of housing supply. Increasing supply is key to addressing the current difficulties in the housing market, and the Government has taken a significant number of measures in this area through Rebuilding Ireland – Action Plan for Housing and Homelessness. As you will be aware, Budget 2018 provided significant increases in funding for a number of initiatives aimed at increasing the supply of new homes. These measures include funding of €750 million for a new vehicle – Home Building Finance Ireland – to boost the supply of debt funding to residential development. An additional €500 million was allocated to build a further 3,000 social housing units by 2021. An extra €75 million is also being provided under the Local Infrastructure Housing Activation Fund. I also announced an increase to the rate applicable under the vacant site levy in the second and subsequent years of continued vacancy. This will provide a strong incentive to owners of these lands to either develop them or sell them for the purpose of development.
Although admittedly coming from a low base, the latest figures from the Department of Housing show significant increases in residential construction activity, with Commencement Notices and ESB connections up 36% and 28% respectively to November 2017. My Department will continue to work with the Department of Housing, Planning and Local Government and all other stakeholders to ensure housing supply maintains this growth. Increasing the supply of homes is the most effective method of easing inflationary pressure in the housing market.