No evidence of a land bubble in Ireland, says Varadkar

Taoiseach admits land is not being made available for development quickly enough

Leo Varadkar: “I haven’t seen convincing evidence of a land bubble at this stage,  but it’s something obviously we have to look out for.” Photograph: Tom Honan

Leo Varadkar: “I haven’t seen convincing evidence of a land bubble at this stage, but it’s something obviously we have to look out for.” Photograph: Tom Honan

 

Taoiseach Leo Varadkar has said he does not believe there is a land bubble in Ireland.

“I haven’t seen convincing evidence of a land bubble at this stage,” Mr Varadkar said at a briefing with journalists. “But it’s something obviously we have to look out for.”

Asked about recent warnings from the Central Bank and the National Treasury Management Agency (NTMA), and if he thought there was a land bubble or a property bubble in Ireland today, the Taoiseach said: “On a land bubble, I don’t. But I do think there is a lot of land that isn’t being made available for development quickly enough, and that is why we brought in the derelict sites levy, for example, and the vacant site tax to make sure there is more land available, and is also why we are setting up the land development agency which will have CPO powers to acquire land and develop it. That is the action that is taking place.”

Escalating rents

The Taoiseach’s remarks come amid growing concern about escalating rents, especially in Dublin, and warnings from a raft of official bodies about the dangers of overheating in the economy.

House prices have risen steadily in recent years, with annual gains of over 10 per cent bringing house prices in many areas back to their pre-crash peak.

Average rental prices are €1,900 a month in Dublin, according to the property website Daft.ie, a rise of 11 per cent since last year.

Recently NTMA chief executive Conor O’Kelly told the Dáil public accounts committee that the rental market was evidence of a clear “market failure” in the property market.

Mr O’Kelly agreed that that current rental costs for middle-income and lower earners is “unsustainable”.

Systemic risk

The Central Bank warned earlier this summer that the current growth in mortgage lending, if it persists, could pose a systemic risk to the Irish economy.

Even with the Central Bank’s strict mortgage lending rules, introduced in 2015 to guard against another property-related credit bubble, new mortgage lending jumped by 29 per cent last year to nearly €7.3 billion, the bank said.

The bank said that if this rate of increase were to continue in 2018 and household incomes rise in line with current forecasts of about 3.5 per cent, “excessive cyclical risks” related to mortgage lending may emerge.

Earlier this week the Central Bank again warned about overheating in the economy, urging politicians to be ultra-cautious in policy decisions.