Central Bank says property price growth is justified

Minutes of November meeting show regulator does not see figures out of line

The Central Bank does not believe the recent surge in annual house price growth, which now exceeds 12 per cent, is out of line with economic fundamentals

At its latest Macroprudential Measures Committee meeting in November, Central Bank policymakers were presented with a review of the residential property market amid concern that another property price bubble may be forming in the Irish economy.

However, according to the minutes of the meeting, published on Monday by the bank, they concluded that the current level of price growth was justified.

“Notwithstanding that residential property prices have been increasing strongly for a number of months, it was considered that the analysis does not point to price growth being out of line with that which would be justified by developments in economic fundamentals,” the minutes said.


The latest property price figures for November will be published by the Central Statistics Office (CSO) on Thursday.

With figures from Goodbody Stockbrokers also published on Monday showing the supply of new homes lagging demand by more than 20,000 units, price growth is expected to remain strong for the foreseeable future.


The minutes show that Central Bank policymakers noted that price growth in the State’s commercial real estate market, which has recovered quicker than the residential sector from the crash, had moderated recently.

While the overall credit environment was noted to be strengthening, with strong cyclical dynamics present in certain sub-components, policymakers concluded that “ aggregate credit conditions” remained subdued.

Indicators of external imbalances and bank resilience were observed not to point to an increase in cyclical vulnerabilities at this time, the committee, which is chaired by Central Bank governor Philip Lane, noted.

Following discussion of the indicators, it was agreed that the proposed counter-cyclical capital buffer (CCyB) rate of zero per cent for the first quarter of 2018 was “appropriate at this juncture”.

The CCyB rate is reviewed by the bank on a quarterly basis and can be increased up to 2.5 per cent if the Central Bank deems lending to be excessive.

A CCyB rate of 1 per cent is the level that reflects an economy that is running normally.

In recent times, several macroprudential measures have been activated via the banking system, including the CcyB and the mortgage lending rules.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times