Brendan Burgess
Founder
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The ESRI had another shot at the Central Bank's mortgage restrictions today.
"Developments on the supply side of the Irish housing market have a number of
important policy implications. For example, the Central Bank of Ireland has signalled that there will be a review of the macro-prudential policy measures in November of this year. These measures, which were aimed at curbing house price inflation, were introduced in February 2015 after a consultative process. The review exercise will be an important opportunity to modify the implementation of this crucially important policy tool.
In Duffy and McQuinn (2015) we argued that macro-prudential policy should be implemented on the basis of counter-cyclical policy rules. These rules would be triggered on the basis of a certain set of indicators focussing on house prices, supply levels and developments in mortgage credit. In recommending this, we
feel we were advocating the adoption of international best practice where influential contributors such as Bank of England (2009), have all broadly recommended such a course of action. The mere signal of a rule change can itself have a significant impact on market activity, although naturally rules in the monetary policy space have been demonstrated to provide greater clarity and transparency to different market participants if consistently applied. Furthermore, analysis in the previous Commentary demonstrates why it is important that housing market activity should have a significant weight in any decision rules. If housing supply reaches the level of structural demand in 2018, macro-prudential policy could then play an important role in ensuring we do not experience the spiralling levels of supply evidenced in the Irish market in the early part of the 2000s. It is, after all, the combination of overvalued house prices and large volumes of housing supply which poses a systemic financial stability concern."
In May 2015, it published a paper on the issue:
https://www.esri.ie/publications/macroprudential-policy-in-a-recovering-market-too-much-too-soon/
In December 2015, it had a general paper on the housing supply issue:
A Review of Housing Supply Policies
"Developments on the supply side of the Irish housing market have a number of
important policy implications. For example, the Central Bank of Ireland has signalled that there will be a review of the macro-prudential policy measures in November of this year. These measures, which were aimed at curbing house price inflation, were introduced in February 2015 after a consultative process. The review exercise will be an important opportunity to modify the implementation of this crucially important policy tool.
In Duffy and McQuinn (2015) we argued that macro-prudential policy should be implemented on the basis of counter-cyclical policy rules. These rules would be triggered on the basis of a certain set of indicators focussing on house prices, supply levels and developments in mortgage credit. In recommending this, we
feel we were advocating the adoption of international best practice where influential contributors such as Bank of England (2009), have all broadly recommended such a course of action. The mere signal of a rule change can itself have a significant impact on market activity, although naturally rules in the monetary policy space have been demonstrated to provide greater clarity and transparency to different market participants if consistently applied. Furthermore, analysis in the previous Commentary demonstrates why it is important that housing market activity should have a significant weight in any decision rules. If housing supply reaches the level of structural demand in 2018, macro-prudential policy could then play an important role in ensuring we do not experience the spiralling levels of supply evidenced in the Irish market in the early part of the 2000s. It is, after all, the combination of overvalued house prices and large volumes of housing supply which poses a systemic financial stability concern."
In May 2015, it published a paper on the issue:
https://www.esri.ie/publications/macroprudential-policy-in-a-recovering-market-too-much-too-soon/
In December 2015, it had a general paper on the housing supply issue:
A Review of Housing Supply Policies