Consumption and house prices in Ireland

We examine the link between private consumption and housing wealth in Ireland. We find that the marginal propensity to consume out of housing wealth is essentially zero. This is in marked contrast to the recent evidence for other OECD countries. The evidence is robust to changes in statistical methodology. Thus we can conclude that the recent consumption growth has not been financed by borrowing against housing wealth perhaps because that the private sector does not find recent increases in house prices fully credible.