Purpose This paper aims to examine the implications for the Irish housing market of the economic slowdown due to the Covid-19 virus. Design/methodology/approach In this paper, an inverted demand function for housing is augmented to include a residential market activity variable and estimate the impact on house prices of the decline in economic activity due to the virus-related measures. The likely future path of house prices based on two different recovery scenarios is also examined. Under both scenarios house prices are forecast to decline in the near term. Findings The scenario analysis presented here indicates that Irish house prices are set to fall over the next 18 months as a result of the Covid-19 downturn. This contraction in prices is due to the decline in household disposable income and the sharp fall-off in mortgage market activity, which will inevitably result from the administrative closedown implemented by the Irish authorities. Originality/value As such the approach builds on several studies which have examined both house price movements in general and the relationship between house prices and mortgage credit availability. The paper also draws on the latest analysis of the implications for the Irish economy of Covid-19 and the related administrative closure methods introduced by the public authorities.
In this paper we examine some of the potential channels through which COVID-19 is likely to impact the Irish housing market and discuss some policy areas which may need refocusing or re-evaluation. Building on existing work by ESRI researchers, we examine the implications under the headings of housing demand, housing supply, affordability of prices and the rental market. While there is likely to be a significant number of effects across a wide variety of headings, the most long-lasting impact of the crisis is the potential exacerbation of the imbalance between housing demand and supply which already exists in the market. The most efficient policy response in that context is for an increase in the State provision of social and affordable housing over the short to medium term.
2018 saw the Irish economy register another sizeable increase in activity with GDP estimated to have risen by 6.7 per cent. While some of this increase is due to the disproportionate activities of a select number of multinational firms, the underlying performance of the economy is still remarkably strong. Increases in taxation receipts, even aside from corporation taxes and the ongoing dynamic performance of the labour market, are compelling evidence of this. However, the present year has seen international sources of growth cool; the underlying weaknesses in the Chinese economy along with the deterioration in the trade relationship between the US and China have contributed to a reduction in the global outlook. The recovery in the Euro Area has also stalled somewhat. Inevitably, this will impact on the domestic economy, with the contribution of the trade balance to growth set to decline. These developments have led us to revise downwards our forecast of real GDP growth in 2019 from 4.2 per cent in the previous Winter Commentary to 3.8 per cent for 2019. It should be noted that all forecasts in the Commentary, unless otherwise stated, assume that the United Kingdom remains a member of the European Union. The importance of Brexit for the Irish economy has seen the Department of Finance commission a joint research project with the ESRI to examine various different Brexit scenarios using COSMO-the structural model of the Irish economy. Other empirical work completed by researchers at the Institute (Lawless, 2016a; Lawless, 2016b; Lawless and Morgenroth, 2018) 1 examining the Brexit issue from a microeconomic persective has also been used in this exercise. The results of this analysis, which are published in a paper with the Commentary (Bergin et al., 2019), are used in the Commentary to examine the implications for the short-run growth outlook of the different scenarios. Therefore, like the previous Commentary, we produce a baseline set of forecasts under a no-Brexit scenario and complement this with a set of forecasts associated with certain Brexit outcomes. Overall, this results in a baseline real GDP forecast of 3.8 per cent for the Irish economy in 2019 and 3.4 per cent in 2020. However, under a no-deal exit for the 1
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