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From the trough in early 2013, residential property prices nationally have increased by 49.1% - Leaving Cert Economics - Question c - 2017
Question c
From the trough in early 2013, residential property prices nationally have increased by 49.1%. (Source: CSO, Residential Property Price Index, December 2016) i) Sta... show full transcript
Worked Solution & Example Answer:From the trough in early 2013, residential property prices nationally have increased by 49.1% - Leaving Cert Economics - Question c - 2017
Step 1
State and explain three factors that caused the price of residential property to increase considerably since 2013.
Answer
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Recovery in Employment and Incomes / Confidence in the Economy
The recovery in employment means that more people could afford to purchase property, thereby increasing demand and prices. Additionally, growing confidence in the economy motivated individuals to borrow money for property purchases. -
Lack of Supply
The demand for residential properties has outstripped supply, with too few new properties being built to meet the increased demand. This shortage has resulted in rising prices as builders capitalize on the limited available properties. -
Increasing Urbanization
Urban areas, particularly Dublin, have seen significant increases in property prices due to urbanization. As more people relocate to cities for employment opportunities, the demand for housing in these areas has surged, driving property prices up.
Step 2
Discuss two possible economic consequences of the above situation.
Answer
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Increased Pressure on the Rental Market
As more people are priced out of buying homes, there will be increased demand for rental properties, leading to upward pressure on rental prices. This can create financial strain for those who are unable to afford rising rents. -
Increased Government Revenue
With rising property prices, government revenue could increase due to higher income from property taxes and stamp duties. This additional revenue could potentially be reinvested into public services, benefiting the wider economy.