Bernard Durkan (Kildare North, Fine Gael)
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173. To ask the Minister for Finance the extent to which efforts are in place to curtail the upward spiral of inflation affecting house prices; the extent of the measures anticipated to control this surge; and if he will make a statement on the matter. [21579/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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My Department continues to monitor all aspects of the property market, including the rate of property price inflation, on an ongoing basis. According to the most recent figures released by the Central Statistics Office, the National Residential Property Price Index increased by 15.3 per cent in the twelve months to February 2022.

Many of the factors explaining the current high inflationary environment are not within Ireland’s control, including the inflationary impact of Russia’s unprovoked invasion of Ukraine, the impact of a rapid rebound in global demand and global supply chain disruptions affecting the availability of key inputs. However, the underlying factor driving house price inflation in particular, is insufficient supply.

As a result, the Government’s primary response to mitigate residential price inflation has been to increase supply with recent data providing encouragement in that regard. In the twelve months to March 2022, 34,846 new homes were commenced, the highest since May 2008. Moreover, planning permission was granted for the construction of 42,991 new homes in 2021, the highest since 2008.

In addition to increasing the supply of homes in general, more work needs to be done to increase the supply of social and affordable homes. In Budget 2022, €4 billion was allocated towards housing, including capital funding of €2.58 billion, a large proportion of which will be used to deliver 9,200 new social homes. The vast bulk of this will be delivered through new-build.

Housing for All targets the delivery of 54,000 affordable homes for purchase or rent and over 90,000 social homes by 2030. Achieving these targets will make a real difference in improving affordability for our citizens.

All of these measures testify to the need to take a multi-faceted approach to increase the supply of new housing and I will continue to work closely with my Government colleagues to ensure these targets are delivered.

Bernard Durkan (Kildare North, Fine Gael)
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175. To ask the Minister for Finance the extent to which investment funds here are contributing to the spiral of house prices; and if he will make a statement on the matter. [21581/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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According to data from the Central Statistics Office (CSO), real estate companies account for a relatively small proportion of housing transactions. In 2020, the latest year for which data is available, such firms purchased 2.8 per cent of all transacted units. While the number of transactions from such investors has likely increased since then, it is unlikely they capture enough share of the housing market to have a significant effect on overall national property price inflation.

Institutional funds typically purchase newly built urban apartment blocks via forward – commit arrangements. Under such arrangements the investor agrees to buy a block of apartments upon completion. The guaranteed sale de-risks the project, allowing the developer to secure finance and build the block. Without such arrangements the new apartments may never be built.

Forward-commit deals have helped lead to a significant increase in the number of new apartments being built over recent years. CSO statistics show that 5,107 new apartments were built in 2021, more than double the 2,258 apartments built in 2018.

The high property price inflation seen in recent months is primarily due to an undersupply of homes in the market. The Government’s primary response to mitigating residential price inflation is to increase supply. Recent data provides encouragement about the delivery of future housing completions. In the twelve months to March 2022, 34,846 new homes were commenced, the highest level since May 2008. Moreover, planning permissions was granted for the construction of 42,991 new homes in 2021, the highest since 2008.

The overall investment required to build an average 33,000 homes per year is an estimated €12 billion, which will require finance from the domestic banking sector, international investors and the State. Significant State investment has already been committed as part of Housing for All, with over €4 billion to be invested in housing per annum to 2030.

Delivering on our housing targets will require significant resources from both the public and private sectors and I will continue to work closely with my Government colleagues to ensure these targets are delivered.

Bernard Durkan (Kildare North, Fine Gael)
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176. To ask the Minister for Finance his views on whether investment funds in Ireland are making an opportunistic profit through the use of the construction sector given the fact that the main banks here are not competing; and if he will make a statement on the matter. [21582/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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Through the implementation of the Housing for All strategy, the Government plans to increase the supply of housing to an average of 33,000 per year over the next decade. This is an ambitious plan which will provide increased housing supply and affordability.

While the plan is backed by unprecedented State investment, the Government cannot deliver on this programme alone. The only way we can deliver housing at the substantial scale we need is by also attracting private capital to the market.

Through modelling undertaken by the Department of Finance, it is estimated that €12 billion of development funding per annum, comprising both debt and equity, will be required to develop the Housing for All target of an average of 33,000 homes per year. Of this €12 billion per annum, an estimated €10 billion will be required from private capital sources. While a portion of this will come from our domestic banks, the majority will be required from international sources.

Domestic banks set risk limits around the type and nature of lending activity, resulting in selective and prudent lending practices. It is not desirable that domestic banks provide senior debt at unsustainable levels and levels of debt should appropriately reflect the risk profile of development projects.

As a result, we will attract and welcome inward investment to our housing market, as we have successfully done with investment in other sectors of our economy. This private and patient capital coming from well-established investors such as pension funds is a normal facet of housing investment in many of our European neighbours and beyond.

A substantial increase in the supply of new homes is the only route to solving Ireland’s housing crisis. This will require significant private investment alongside our public investment and is necessary to meet the targets set out in the Housing for All strategy.