1887

OECD Economics Department Working Papers

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.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Ireland's Housing Boom

What has Driven it and Have Prices Overshot?

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.

English

Keywords: house prices, residential construction, property tax, housing market
JEL: R21: Urban, Rural, Regional, Real Estate, and Transportation Economics / Household Analysis / Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand; R31: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Housing Supply and Markets; E2: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
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