We all know that without EU/IMF assistance the Irish economy would have been in serious trouble as a consequence of the worldwide financial crisis and various financial scandals in the Irish financial sector. The very fact that island has paid back the bailout loan before it was actually due seems to have had little impact upon the European Commission which is constantly visiting Ireland on so-called “post bail out surveillance missions”. So, why has the Irish housing market caught the attention of the European Commission and what will happen in the short, medium and longer term?
Surely the European Commission’s role is now over?
Many Irish MPs are concerned that the European Commission seems intent on playing a role in not only the Irish housing market but policies with regards infrastructure spending and more. It is a little bizarre that the European Commission has chosen this moment to become very publicly involved in Ireland just as the European Union and the UK ready themselves to start Brexit talks. The European Union has already been waxing lyrical about the need to maintain a soft border between Northern Ireland and the Republic of Ireland which is really nothing to do with European MPs?
Irish housing market
Like so many other countries around the world, the domestic housing market played a major role in the downfall of the Irish economy. In the boom times there were far too many property developments waved through by the authorities and by the time the economic crisis came it was too late. There were literally rows and rows of new houses untouched and certainly not in demand. The situation has changed dramatically over the last couple of years as the Irish housing market has sprung into life and the financial sector seems to be much less volatile.
Official figures show that property prices increased at the fastest rate since 2007 which was just prior to the worldwide economic collapse. Indeed, figures show that house prices jumped by an average 7.9% in 2016 and an impressive 9.6% in the year to March 2017. This is the kind of rate which cannot continue and while some kind of “cooling effect” is required, it is not necessarily required from the European Commission.
Rising rents and property values
House price inflation is now pushing house prices to levels which are unaffordable for new buyers due in part to the UK government’s Help to Buy scheme. In the UK as a whole this scheme has helped to support prices but perhaps in a relatively small market such as Ireland the effect has been more dramatic. As the cost of houses continues to rise so many are now forced to switch to the rental market which is starting to push up rents.
Comments by the European Commission are in all fairness honest and obvious in that Ireland needs to build more houses as a means of curtailing house price rises which will also assist with employment and a more prosperous construction sector. There will come a point when Irish politicians will fight back at the European Commission which seems determined to become part of the Irish political scene. The bail out loan has been repaid, the economy has picked up and while house price inflation is at uncomfortably high levels surely it is the job of the Irish political parties to address this?