Quantifying the real economy effects of macroprudential policy is important at a time when such measures are increasingly being promoted as central to the prevention of future credit and house price bubbles. Recently, like other regulatory authorities, the Irish central bank introduced regulatory limits on mortgage lending aimed at protecting greater financial stability. In this paper, we seek to examine some of the wider implications of these measures for tenure choice in the Irish housing market. We find that a reduction in the loan-to-value ratio, such as may occur as a result of regulatory limits, will lead to a greater demand for rental accommodation, prompting higher rents for a given house price level. While this result is somewhat incidental to financial stability, it does have significant implications for housing policy, particularly, at a time when the Irish housing market is confronted by an acknowledged supply shortage.
ESRI Series Number: 201637 Research Area:Macroeconomics Date of Publication: September 30, 2016 Published Online: June 09, 2016 Publisher: Elsevier View External Link
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