Ireland has not 'turned the corner' on house price inflation, says O'Brien

Housing Minister Darragh O'Brien has said the rate of house price inflation will likely decrease in 2023.

Ireland has not "turned the corner" on house price inflation, the Housing Minister has said.

Darragh O'Brien said the country is likely to see a continuation of house price increases, but it will likely be lower than in previous years. A Davy analysis published last week suggested prices could rise by 4% this year and Mr O'Brien said he does not see any reason to believe that will not happen.

"I don't think we've turned the corner yet, to be frank. We were dealing with 10 or 12 years of very significant undersupply in housing, both in private and social and affordable housing.

"2022 (figures will show) we're going to deliver substantially more social homes than we've done in a long, long time. That's a good start. Is that enough? No, it's not. So we need to do more than that. We need to target this year  29,000 new homes. And, even with a high inflationary environment, high-interest rate environment, there are challenges this year, there's no question but we're determined to be able to do that.

"But I do think this year the inflationary environment around housing should decrease. And I do think we will see a decrease in relation to that, but really what it's about is making sure that more people can buy at affordable rates and that's what I'm certainly focused on doing and that's starting to happen. It is happening."

Mr O'Brien added that the Government "has to watch" whether developers are building in profits to increases in house prices caused by inflation. Cairn Homes had said that inflation had added €35,000 to the cost of building a home. 

 Mr O'Brien said: "We've got to watch that and watch it very carefully. There's no question that there's been a material increase in inflation —the materials and building costs are particularly acute since the start of the war in Ukraine. Supply chains have improved now. Obviously, margins are built-in with any contract, you can't get funding to build a scheme without a margin there and that's available for a reasonable profit to be made. But that's what it should be — a reasonable profit. I think the average purchase price for a first-time buyer, they spent about €360,000 — I don't want to see that increasing substantially anymore."

Meanwhile, Taoiseach Leo Varadkar will on Tuesday meet up to 50 stakeholders in the housing sector. The meeting is being billed as being "designed to provide stakeholders with an opportunity for direct feedback to Government on the current housing situation, and to make suggestions on what additional practical actions can be taken to accelerate delivery of Housing For All". It has been criticised by the opposition.

Sinn Féin's Eoin O Broin said the summit is "an admission that the government's housing plan is failing".

First Homes Scheme

Darragh O'Brien was speaking as his department launched an update on its €400 million First Homes Scheme, which sees the Government take a stake in new-build houses and apartments being purchased by first-time buyers. 

The update shows that 750 people have had applications approved since the scheme opened in July last year. Combined, they have received approval for around €57 million in equity funding. However, Mr O'Brien rejected the idea that the scheme does little to impact affordability. He said that it was a "supply-side measure" designed to bridge an "affordability gap" for first-time buyers.

The average amount given to home purchasers was €71,000 with some applicants receiving just under €100,000.