ESRI questions Central Bank moves to dampen housing market

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Brendan Burgess

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Original document : [broken link removed]

It's only 4 pages of text and very well argued and easy to follow, if you skip one complicated looking formula.


In principle, the potential application of a macro-prudential suite of measures in the Irish property market is a welcome and prudent development.


...
However, we feel that in the interests of both efficiency of policy implementation and the transparency with which these measures are communicated to key
market participants, these levers should be applied on a counter-cyclical rules basis. This is not the case with the present proposals. In that context we would
question both the absence of such rules underpinning the proposed framework and the application of the proposed measures in the Irish market at the present
time.

...
2. An increasing body of research in the macro-prudential area now argues for the use of rules in implementing these policy levers rather than discretion.

3. In that context, it is regrettable that no such rule has been outlined by the Central Bank in proposing these measures. Any such rule, we believe, needs
to take into account cyclical patterns within the housing market i.e. the rule should be counter-cyclical in nature with policy measures being tightened if
the rule indicates the presence of too much credit, for example, in the market and loosened if the opposite is the case.
...
in McQuinn (2014), for example, the results of four standard models of Irish house prices suggest that, as of Q4 2013, Irish house prices still appear to be undervalued.
...
Given the already very low levels of housing construction, there is a danger that the adoption of these measures may have additional, adverse implications for future residential supply. Both property developers and financial institutions may be concerned about movements in future prices and the potential affordability
of prospective mortgagers.
 
I agree with the ESRI, that the new CB measures will exacerbate the issue with supply. There is already a massive problem with supply in Dublin, I can only see it getting worse. Why would you build if people cannot get mortgages to buy.

What is also amazing to me, is how many different organisations are receiving money for homelessness, why are there so many of them, all that administrative cost. And is there even accountability, as in public printing of accounts including salaries, donations etc. As a bishop (think it was Martin) said, it's an industry.

And so far not one real concrete plan to easy supply, no easing of planning, no preventing of land hording, no easing of tax on building.

For those at the margins, no increase in rent supplement in Dublin. It's shameful that families are forced into hotels. The rent supplment should be increased until social housing and ordinary supply are restored.
 
The ERSI also said

"However, the ESRI called for a rules-based system to tighten loan caps if agreed indicators point to excess credit, and loosen them if the opposite is the case ."

taken from http://www.irishtimes.com/business/...bank-moves-to-dampen-housing-market-1.2040195

New rules are one thing a poorly timed intervention in the market is another. I am afraid that what we will get is a poorly timed intervention in the market which will be reversed as soon as there is a sustained pick up.

Separately, I agree with Brontes point about all those agencies, no long term policies to address the real issue.
 
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