The housing shortage is hitting Ireland’s economic competitiveness, with multinational companies raising it as an issue of significant concern, according to the Economic and Social Research Institute (ESRI).
Officials from the ESRI were before the Oireachtas committee on budgetary oversight on Wednesday taking questions on the “pre-stability programme update”, one of the first steps in the preparation for Budget 2025.
ESRI research professor Kieran McQuinn said house prices are going to continue to rise because although supply levels are increasing, they remain below the levels needed to meet not just natural demand but the backlog as well.
“Certainly it is impacting on competitiveness in the economy,” he said. “You are hearing a lot of information about multinationals raising it as an issue, and raising it as a fairly significant issue from their perspective.
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“They pay very good wages – probably the best wages in the economy – but if a large proportion of those are going on housing costs it raises issues for them.”
He said part of the problem with the housing crisis could be traced back to changes in the mortgage market and banking sector after the financial crisis.
“The regulatory changes really mean that the kind of credit levels that are extended by financial institutions aren’t back,” he said. “It is hard to envisage that they will meet the actual requirement that is needed going forward.
“That has thrown up a funding gap. We’re seeing the Government step into the breach more and more in terms of providing funding. The fact we are in a high interest rate environment puts the private sector under that bit more pressure.”
Given the scale of supply that is needed, both the private sector and public sector are needed to bridge the gap, he said. “The Government is trying to take the lead at present, but that probably is not sustainable in terms of the overall size of the increase in supply that is required,” he continued.
“There is an issue in terms of how we get more basic funding into the market. It is why we need the institutional funds as well, even though we have to make sure we don’t see housing estates being gobbled up by them. We need as many sources of funding as possible.”
Separately, Prof McQuinn said workers should see “real wage growth” – where pay increases outstrip inflation – sometime this year “for the first time in quite a long time”.
He also said household savings rates, which had been running at a high of 25-30 per cent during the Covid-19 crisis, had buffered consumers up to now but that these savings had now been largely eroded. He added that household savings rates have returned to pre-Covid norms of about 10 per cent.
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