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Law of demand in Irish houses market Dublin
According to Boyes and Melvin, the Law of demand is such that consumers tend to buy more of a good or service, if there is a drop in the price of such a commodity (2010, p.48). More so, if the quantity and quality of the commodity remains the same. In other terms, the law of demand provides that the quantity of a commodity in which consumers are interested in buying and are able to buy in a given period of time tends to fall in the event that the price of that commodity increases and viceversa.
In 1998, the Repblic of Ireland continued to experience vibrant economic times bringing about a situation whereby market stability in the housing sector has been componded by the increase in demand for housing (Bacon & MacCabe, 2000, p. 16). 1996 and 1997 have been years of good economic tidings with significant growth digits being recorded. Interests rates fell drastically in 1999 as well as internal factors such as robust inward migration further coontributing to increased demand (Forum for the Construction, 2001). This translated to a demand of nearly 10,000 housing units annually. It was expected that the housing market volatility was to continue into the medium term.
This was provided for by govenrment financed packages introduced in 1998 to stabilize Ireland’s housing market as well as to improve first time home owners better access to housing (Bacon & MacCabe, 2000, p. 16). The pattern exhibited through to 2000 indicated that the packages introduced translated to a faster acceration ineconomic growth than was earlier forecasted. GDP was recorded at more than 8% in 1999 while interests rates continued to decrease considerrably reaching a level which was the lowest compared to other countries in the EU. The graph below highlights the different price trends in the country compared to Dublin and other regions
Figure 1 House prices in Ireland, Dublin, Limerick, Cork, and Galway. Source: environ.ie
As shown in the graph in figure 1 above, Dublin, the capital city of the Republic of Ireland saw increases in the price of new housing units which was nearly 10% higher than the whole of Ireland. In quater one of 1998 in prices increase peaked at nearly 38% though considerably fell to nearly 22% the following year, down to 13% in quater one of 2000 similar to the rest of Ireland (Bacon & MacCabe, 2000, p. 17).
This outcome was encouraged by the governent tax reliefs offered on mortage interest in a society which had previously embraced home ownership as normal such that every Irish family aspired to own a home (Department of Finance, 2013). As such, in 1998, 80% of housing units in Ireland were privately with the government, local authorities and othe rinstitutions owning a combined total of 20% of housing units in Ireland compared to 50% of housing units privately owned in other parts of Europe (Communist Party Of Ireland, n.d). The government took oveer the responsibility of housing those unable to acquire their own homes. However, this ancient policy was said to favor the rich as real estate was heavily dictated by the so called home ownership class.
The government of Ireland had no policy on housing units necessary to accomodate interested home owners in housing lists. Thus, local authorities tended to vacate public housing in favor of offering rent rebates via a supplimented welfare allowance so as to sell held stocks (esatclear.ie, n.d ). Ireland was sparsely populated then and as cities like Dublin began experiencing an influx of immigrants land prices exploded. This pushed up th ecost of housing brining about a situation whereby many people in Dublin could not afford to own a home.
esatclear.ie. (n.d). Gvt Action. [Online] Available from: http://www.esatclear.ie/~buildingwithbacon/gvt2.htm [Accessed: 10th November 2012].
Bacon, P. and MacCabe, F. (2000) The Housing Market in Ireland: An Economic Evaluation of Trends & Prospects. [Online] Available from: http://www.environ.ie/en/Publications/DevelopmentandHousing/Housing/FileDownload,2075,en.pdf [Accessed: 10th November 2012].
Boyes, W. J. and Melvin, M. (2010) Macroeconomics. Cengage Learning.
Communist Party of Ireland. (n.d ) The housing crisis. [Online] Available from: http://www.communistpartyofireland.ie/c-tithe-en.html [Accessed: 10th November 2012].
Department of Finance. (2013) Problems in the Single Market. [Online] Available from: http://www.finance.gov.ie/viewdoc.asp?DocID=833&CatID=45&StartDate=01+January+1998 [Accessed: 10th November 2012].
Forum for the Construction. (2001) Implementation of the Report / Recommendations of the
Strategic Review Committee (SRC), 1997. [Online] Available from: Industryhttp://www.environ.ie/en/Publications/StatisticsandRegularPublications/ConstructionIndustryStatistics/FileDownLoad,1771,en.pdf [Accessed: 10th November 2012].
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