Government’s mortgage program will raise prices in the short term, central bank says
The government’s shared home loan has the potential to drive up house prices in the short term, according to a Central Bank report.
The bank’s 2021 Financial Stability Review says the program, which was part of the Housing For All plan announced in September, will alter housing demand but will do little to lower prices in the short term.
Housing Minister Darragh O’Brien has championed the project since it was first launched last year. It will see 75 million euros of public funds allocated to allow the government to offer equity loans of up to 30% on new homes of less than 400,000 euros.
The report indicates that house prices will be affected by continued inflation in the cost of construction as well as by the implementation of government policy.
“Inflation of construction costs and the implementation of recent government initiatives in housing policy are also likely to influence the development of house prices in the short to medium term.
“The past few quarters have seen substantial increases in many categories of key labor and material costs from pre-pandemic levels. A period of prolonged cost increases in the construction industry is emerging. likely to affect house price inflation.
“Housing policy will also have a decisive influence on the dynamics of residential property prices. to what it could have been, in the medium term.
“However, it will take time for the proposed units to be delivered and for the effects to be felt. In the short term, the ‘First Home’ private equity system works by shifting the demand for home purchases and, therefore – in a limited supply market – has the potential to increase pricing pressures. “