Bernard Durkan (Kildare North, Fine Gael)
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229. To ask the Minister for Finance the extent to which measures introduced in this jurisdiction to combat such issues as inflation, here and-or throughout the eurozone, are being successful; and if he will make a statement on the matter. [4868/24]

Michael McGrath (Cork South Central, Fianna Fail)
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Ireland alongside all other Eurozone countries has experienced multi-decade high rates of inflation. Whilst inflation in Ireland peaked over the summer of 2022 at 9.6 per cent, inflation in the Euro Area peaked later and at a higher rate (10.6 per cent in October 2022). Whilst the initial driver of the inflationary pressure was a surge in global energy prices it subsequently became increasingly broad based as price pressures spread throughout the economies.

To combat these high rates of inflation, the ECB raised interest rates at a record pace, with the main refinancing rate reaching 4.5 per cent in January, from zero for much of the past decade. Whilst this has been a necessary step to prevent inflationary expectations from becoming de-anchored, the increase in interest rates will have knock on implications for the financing burden faced by both businesses and households. Indeed, higher mortgage rates to households and cost of capital firms are expected to act as headwinds to growth in the year ahead.

Throughout this period of high inflation the Government has provided timely support to households and businesses. Many of the fiscal supports enacted have been temporary and targeted in order to help those most in need without exacerbating price pressures or impeding the ECB’s efforts of returning inflation to target.

I am happy to report that we appear to have turned a corner on inflation, though the path to price stability may not be smooth. The latest data suggests that inflation in Ireland was at 3.2 per cent in December of last year, an uptick on November, while it was at 2.9 per cent for the euro area. Despite some potential volatility, my Department expects the downward trajectory in inflation to continue throughout 2024. At the time of Budget 2023, the Department forecast average headline annual inflation of 2.9 per cent for this year.

Bernard Durkan (Kildare North, Fine Gael)
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230. To ask the Minister for Finance the extent to which house price inflation here is likely to affect economic performance in the future; and if he will make a statement on the matter. [4869/24]

Michael McGrath (Cork South Central, Fianna Fail)
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My Department continues to monitor all aspects of the property market – including the rate of house price inflation - on an ongoing basis, although policy issues in this area rest with the Minister for Housing, Local Government and Heritage. According to the most recent figures released by the Central Statistics Office, annual property price inflation was at 2.9 per cent in November, this is a fall from 8.5 per cent in November of last year, but an increase from mid-year lows.

House price momentum over recent months reflects – in part – the pass through of significant but moderating inflation in the cost of construction materials. It follows that new home property price inflation at 10¼ per cent in Q3 2023 was the key driver of house price inflation; offsetting a fall in property prices for existing homes of 1 per cent on the same basis.

Over the medium term, imbalances between housing market demand and supply can create upward pressure on prices with the potential to impact competitiveness and labour supply, and thereby economic performance. The Government’s Housing for All strategy and its programme of housing delivery to meet the needs of a growing population and economy has been in place since 2021, and has underlined increasing supply and delivery against targets in every year since.

For 2022 and 2023 combined, new home completions exceeded targets by 8,800 units. For 2023, 32,700 new homes were built, a 10 per cent improvement on the previous year and some 4,000 units ahead of target. This represents a significant success in terms of response to the imbalance in supply characteristic of post-pandemic in many advanced economies.

Indicators of future supply are increasingly positive and trending in the right direction. Last year, construction commenced on 32,800 new homes, 22 per cent higher than the number of commencements in 2022, and the highest number of annual commencements since records began in 2014. New commencement activity in the final quarter of the year was particularly strong, with 8,900 commenced units in Q4 2023, nearly 50 per cent higher than the same quarter in 2022.

Elsewhere, data on planning permissions show permissions granted for the construction of over 37,500 new homes in the 12 months to September 2023. In addition to this, mortgage drawdowns for first-time buyers reached the highest level since 2007.

Despite the significant progress, challenges still remain and the Government is addressing these through reforms such as the Planning and Development Bill 2023, and the forthcoming revision of the National Planning Framework.