Thursday 27 July 2017

Finance chiefs 'concerned' over spiralling house prices

Recovery a fact: Finance official Derek Moran
Recovery a fact: Finance official Derek Moran
Cormac McQuinn

Cormac McQuinn

The Department of Finance's most senior official has admitted there is "concern" over spiralling house prices and the failure of wages to match the increases.

Secretary general Derek Moran made the remarks as he came under pressure to explain why his opening statement to the Dáil's Public Accounts Committee (PAC) included no reference to crises in housing and health.

The admission came as an external review of the Government's Help-to-Buy scheme for first-time buyers continues amid serious concern it is contributing to rising property prices. This week a MyHome.ie report showed house prices rose nationally by €24,000 in the last six months, with prices going up by €32,000 in Dublin.

At the PAC, Independent TD Catherine Connolly took issue with Mr Moran's initial comments about the "robust pace of recovery" and economic indicators showing "continued solid growth".

She likened the language to Fine Gael's failed 2016 election slogan 'Let's Keep the Recovery Going' and said the growth figures Mr Moran quoted - he referenced a 4.3pc rate this year - indicated the department's belief the economy was "thriving and going in the right direction".

She argued indicators in housing and health would suggest the economy "is not thriving at all".

She said house prices were going up by €1,000 a week and highlighted the issue of patients on hospital trolleys.

Mr Moran said the pace of recovery was "fact" and pointed out that there were 235,000 more people in work over the last five years.

He said his department's role was to set the financial framework in which Government made all of its policy choices, and responsibility for housing and health lay elsewhere.

But he addressed the issue of housing when pressed by Ms Connolly.

He said: "House prices continue to go up. And they go up at a rapid pace. Is that something that we as a department look at and would be concerned about? Yes, it is."

Mr Moran pointed out that prices were still 30pc below the peak, adding: "And I don't think anybody should aspire to values at the peak because that's not sustainable."

He also said: "House prices are going up faster than earnings. Is that a cause of concern that we'd be looking at? Yes, it is."

He said the current situation wasn't being driven by cheap credit or a "credit bubble" and that buyers were over-leveraging themselves.

Mr Moran said the Central Bank mortgage rules had brought constraint as to what people could borrow as a multiple of their income.

But he confirmed the department was looking at the housing situation as a "risk factor".

The department officials were also asked about the risk associated with Ireland missing its international climate change commitments on reducing carbon emissions, including the imposition of massive fines.

Mr Moran said Taoiseach Leo Varadkar had indicated that the Government needed to take action on the issue.

He said it was his understanding that the fines levied on Ireland if the country misses its 2020 commitments would be in the order of €600m per annum.

He said that while it was not his area of expertise, the country was "on the wrong trajectory" in terms of meeting the commitments.

"It's a question of what accelerated mitigation programme can be put in place ... We should do everything that we possibly can to minimise that exposure to a fiscal charge," he told TDs.

Social Democrats TD Catherine Murphy suggested it would be "prudent" to invest now in retrofitting homes to make them more energy efficient and to push ahead with public transport projects such as Dart Underground to reduce emissions from traffic.

Irish Independent

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