OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
 

Ireland's Housing Boom

What has Driven it and Have Prices Overshot? You or your institution have access to this content

Authors:
David Rae, Paul van den Noord
Publication Date
15 June 2006
Bibliographic information
No.:
492
Pages
27
DOI
10.1787/752770732812

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The Irish housing market is very buoyant. The housing boom is driven by strong economic growth, dynamic demographics and low interest rates. However, large tax advantages and relatively lenient credit policies by banks have also played their part, and prices may have become overvalued. To the extent that high house prices reflect favourable tax treatment, they may lead to economic inefficiencies by drawing excessive resources into residential construction. While a soft landing appears the most likely prospect, a disorderly correction of house prices would pose risks for macroeconomic and possibly financial stability. In this context, one policy lever available to the government would be a phased removal of the tax advantages associated with housing. In addition, banks should remain cautious in their lending and provisioning policies.
Keywords:
residential construction, housing market, house prices, property tax
JEL Classification:
  • E2: Macroeconomics and Monetary Economics / Macroeconomics: Consumption, Saving, Production, Employment, and Investment
  • R21: Urban, Rural, Regional, and Transportation Economics / Household Analysis / Housing Demand
  • R31: Urban, Rural, Regional, and Transportation Economics / Housing Markets, Production Analysis, and Firm Location / Housing Supply and Markets