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Central Bank Sets New Housing Target Amid Affordability Concerns

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  //house-home.news-articles.net/content/2025/12/1 .. -housing-target-amid-affordability-concerns.html
  Published in House and Home on Friday, December 19th 2025 at 8:06 GMT by RTE Online

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Central Bank Sets New Housing Target Amid Growing Affordability Concerns

In a move that has drawn attention from both policymakers and the public, Ireland’s Central Bank has announced a new “housing target” aimed at addressing the country’s ongoing affordability crisis. The announcement, reported by RTE News on December 19, 2025, comes as the nation grapples with soaring house prices, rising mortgage rates, and an urgent need to increase the supply of affordable homes.

The Core of the Target

At the heart of the Central Bank’s proposal is a benchmark figure for the average price of a new home in the Greater Dublin Area (GDA). The target sets the average price at €1.15 million by the end of 2027, a 5 % increase from the current 2024 average of €1.09 million. While the figure may seem modest, it represents a strategic attempt to curb the rapid pace of price growth without stalling construction activity.

The Central Bank explained that the target is “not a hard ceiling but a guiding principle to align the housing market with broader macroeconomic objectives.” It will be used to inform future monetary policy decisions, including the policy interest rate and the bank’s oversight of mortgage lending practices. The target is also intended to provide a transparent metric for investors and developers, helping to anchor expectations in a market that has been marked by volatility.

The article links to the Central Bank’s full policy brief, which outlines the methodology behind the target calculation. The brief draws on a mix of historical price data, construction output figures, and projected demographic trends. It also incorporates an inflation-adjusted “housing affordability index” that the bank uses to gauge the health of the market.

Context: The Housing Affordability Crisis

The RTE piece sets the scene by highlighting the long‑standing affordability problem that has plagued Ireland for over a decade. Key points include:

• Price‑to‑Income Gap: The average house price in Dublin now stands at 11.6 times the median gross annual income, a figure that has risen steadily since 2012.
• Mortgage Rate Pressure: Mortgage rates have hovered near 4 % for the past year, after a brief dip to 3.5 % earlier this year, putting additional strain on first‑time buyers.
• Supply Shortfall: The Department of Housing reports that only 12 % of the new homes built in 2024 were classified as affordable, far below the 20 % target set by the national housing strategy.

These factors combine to create a scenario in which a large portion of the population can only access the housing market through rental or through purchasing homes in lower‑priced regional areas.

Stakeholder Reactions

The article captures a range of reactions from key stakeholders:

• Central Bank Governor, Dr. Aine McCormack: In a televised interview linked in the article, Dr. McCormack emphasized that the target “reflects the Bank’s commitment to maintaining a stable financial environment while ensuring that the housing market does not become a source of systemic risk.” She also highlighted that the target would be periodically reviewed in light of market developments.

• Minister for Housing, Michael O’Leary: The Minister welcomed the initiative, describing it as a “first step toward a more sustainable housing market.” He hinted that the government would consider complementary measures, such as tax incentives for developers who build affordable units and a revised planning approval process to speed up construction.

• Developers’ Association: A spokesperson for the Developers’ Association issued a cautionary statement, arguing that a rigid target could hamper construction incentives and push costs higher. The association requested more flexibility, suggesting that a range rather than a single figure might be more realistic.

• Tenant Rights Groups: Several tenant advocacy organisations, whose names are linked in the article, praised the Central Bank’s transparency. They argued that a clear target would help regulate the private rental market, potentially leading to tighter controls on rent hikes.

Policy Implications and Future Outlook

The RTE article explores how the new target could influence a range of policy areas:

1. Monetary Policy: By tying the target to interest rate decisions, the Central Bank signals that mortgage rates may be adjusted to keep the market within the desired price band. Analysts warn that this could mean a tightening of policy if prices overshoot the target.

2. Financial Regulation: The Central Bank will increase scrutiny of mortgage underwriting standards, with a focus on preventing “over‑leveraged” home purchases that could destabilise the system.

3. Housing Supply: The article references a link to the Department of Housing’s forthcoming “Accelerated Housing Initiative” which includes a proposal to streamline planning permissions. The initiative is expected to be rolled out in partnership with local authorities, with the aim of boosting construction output by 8 % over the next three years.

4. Data Transparency: A link to a new data portal launched by the Central Bank is mentioned. The portal will provide real‑time housing price indices, mortgage rate trends, and construction activity metrics, enabling policymakers and the public to monitor progress toward the target.

Looking Ahead

The piece concludes by noting that the Central Bank’s housing target is part of a broader strategy to stabilize the economy in a post‑pandemic context. With inflation expectations at 2.5 % and the eurozone economy gradually normalising, the Irish financial system is under pressure to balance growth with risk mitigation.

Key takeaways for readers include:

• The target is a “guiding principle,” not a legal ceiling, allowing flexibility in response to market fluctuations.
• Stakeholder engagement will be critical. The Central Bank intends to hold a series of consultations with developers, housing advocates, and local councils.
• Success will hinge on complementary policy measures, particularly those aimed at boosting supply and regulating rents.

As the country watches how the target plays out over the coming years, the RTE article reminds readers that the housing market’s health is intrinsically linked to the broader economic fabric. Whether the Central Bank’s new target will steer prices toward affordability, or simply serve as a symbolic marker, remains to be seen. The coming months will be crucial for both policymakers and citizens alike as they navigate this pivotal chapter in Ireland’s housing journey.