I strongly welcome the new ESRI report predicting GNP growth of 4.1% in 2015 and of 3.5% in 2016.
According to the report, the increased level of economic activity should see unemployment rates falling to less than 10% by the end of 2015 for the first time since 2008. This rate is envisaged to decline even further to 8.4% in 2016 – 1.5% down on where that figure was at the end of last month.
Moreover, it is predicted, public finances will be boosted by exports and investment – particularly on the consumer spending front. As a result, the budget deficit should decline to 2.3% of GDP this year, with a further reduction to 0.3% in 2016.
The report also states that an estimated 16,000 new housing units will be built this year – an increase of 5,000 from 2014.
However, while the report paints an overall positive economic picture for the coming years – it also puts on record concerns over the mortgage lending restrictions introduced by the Central Bank.
I have previously voiced my strong concerns about these restrictions and held a public meeting about this very issue last December.
Although I welcomed the subsequent amendment in the restrictions for first time buyer’s – today’s ESRI report never the less warns that these restrictions may depress housing prices – which it reports are undervalued by 10%. Potentially, this means less incentive to construct houses, and therefore fewer properties and rising rental rates.
The research concludes that the impact of the measures will be contractionary suggesting that, while house price inflation may be reduced due to these new measures – this reduction may come at the expense of fewer houses being supplied and fewer mortgage loans being extended.
The reality is that, while Government doesn’t have any formal role in the imposition of this deposit figure, we have a right as public representatives to voice our concern over the implementation of this regulation.