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Macroprudential policy in a recovering property market: too much too soon?

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  • David Duffy
  • Niall McInerney
  • Kieran McQuinn

Abstract

The aftermath of the 2007/2008 financial crisis has resulted in many central banks and regulatory authorities examining the effectiveness of macroprudential policy in preventing the emergence of future credit bubbles. Specific limits on loan-to-value (LTV) and loan-to-income (LTI) ratios have been introduced in a number of economies as a means of ensuring greater financial stability. The Irish property and credit market were particularly affected in the crisis as the domestic housing market had, since 1995, experienced sustained price and housing supply increases. Much of the activity in the Irish market was fuelled by a credit bubble following the emergence of international wholesale funding post 2003. After a period of pronounced declines, Irish house prices in late 2013 started to increase significantly; in early 2015, in response, the Irish Central Bank imposed new LTV and LTI limits to curb house price inflation. However, the introduction of these measures comes at a time when housing supply and mortgage lending are still at historically low levels. Therefore, in this paper we use a newly developed structural model of the Irish property and credit market to examine the implications of these measures for house prices and key activity variables in the mortgage market.

Suggested Citation

  • David Duffy & Niall McInerney & Kieran McQuinn, 2016. "Macroprudential policy in a recovering property market: too much too soon?," International Journal of Housing Policy, Taylor & Francis Journals, vol. 16(4), pages 491-523, October.
    • Handle: RePEc:taf:intjhp:v:16:y:2016:i:4:p:491-523
    DOI: 10.1080/14616718.2016.1210937
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    Cited by:

    1. Duffy, David & McQuinn, Kieran & Foley, Daniel, 2016. "Quarterly Economic Commentary, Autumn 2016," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20163, march.
    2. Kennedy, Gerard & O'Brien, Eoin & Woods, Maria, 2016. "Assessing the sustainability of Irish residential property prices: 1980Q1-2016Q2," Economic Letters 11/EL/16, Central Bank of Ireland.
    3. McQuinn, Kieran, 2017. "Irish house prices: Déjà vu all over again?," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    4. McInerney, Niall, 2019. "Macroprudential Policy, Banking and the Real Estate Sector," MPRA Paper 91777, University Library of Munich, Germany.
    5. Conor O'Toole & Rachel Slaymaker, 2022. "Back to the Future? Macroprudential Policy and the Rebirth of Local Authority Mortgages in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 53(4), pages 223-260.
    6. Duffy, David & Foley, Daniel & McQuinn, Kieran & Mc Inerney, Niall, 2016. "An Empirical Assessment of the Macroprudential Measures in the Irish Housing Market," Research Notes RN2016/3/1, Economic and Social Research Institute (ESRI).
    7. Wong, Siu Kei & Cheung, Ka Shing & Deng, Kuang Kuang & Chau, Kwong Wing, 2021. "Policy responses to an overheated housing market: Credit tightening versus transaction taxes," Journal of Asian Economics, Elsevier, vol. 75(C).
    8. Katja Neugebauer, 2021. "Assessing the effectiveness of the Portuguese borrower-based measure in the Covid-19 context," Working Papers w202110, Banco de Portugal, Economics and Research Department.
    9. Egan, Paul & McQuinn, Kieran & O'Toole, Conor, 2022. "A revised financial satellite model for COSMO," Papers WP737, Economic and Social Research Institute (ESRI).
    10. Bergin, Adele & Conroy, Niall & Garcia Rodriguez, Abian & Holland, Dawn & McInerney, Niall & Morgenroth, Edgar & Smith, Donal, 2017. "COSMO: A new COre Structural MOdel for Ireland," Papers WP553, Economic and Social Research Institute (ESRI).
    11. Wanying Lu & Jianfu Shen, 2022. "Urban Leverage and Housing Price in China," JRFM, MDPI, vol. 15(2), pages 1-12, February.

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