Government scheme could drive up house prices, Central Bank warns

The Housing Minister is under pressure to scrap his controversial Shared Equity Scheme after the Central Bank warned it could push house prices up.

Darragh O'Brien has been urged to focus on other measures instead of his Shared Equity Scheme, which he has been strongly pushing despite widespread concerns and criticism.

In a letter to members of the Oireachtas Housing Committee, the Central Bank has warned that the proposals could result in an increase in house prices and will do little to deal with supply issues.

The plan, which Mr O'Brien brought to Cabinet before Christmas, offers equity loans of up to 30% on new-build homes under €400,000.

In his letter, Vasileios Madouros, the Central Bank's director of financial stability, said: "Overall, taking a broader housing market perspective, the proposed scheme – in isolation – is likely to have a limited impact on the ultimate supply-side problem in the Irish housing market."

"We would, therefore, encourage a continued effort to focus on policies on the supply side of the market – including, but not limited to, some of the other elements of the Affordable Housing Bill."

The Central Bank also suggest that, depending on the final details of the scheme, it could be "in contradiction" with the macro-prudential lending rules.

Mr Madouros has advised members of the Housing Committee who are considering the detailed parameters of the scheme "to be mindful of the potential implications of increased demand for house purchases in a supply-constrained market," if a shared equity model is introduced.

Sinn Féin housing spokesperson Eoin Ó Broin has again called on Mr O’Brien to remove the proposed shared equity loan scheme from his Affordable Housing Bill in the wake of the Central Bank's warning.

The call was made on foot on a submission from the Governor of the Central Bank to the Oireachtas Housing Committee detailing

"In their first full public commentary on the Government's Shared Equity Loan scheme, the Central Bank have outlined a series of potential risks for families, banks and the housing system arising from the proposal," he said.