House prices and rents will remain on an upward curve for the foreseeable future, the Economic and Social Research Institute (ESRI) will tell the Oireachtas Committee on Budgetary Oversight on Wednesday evening.
Several members of the think tank are due before the committee to discuss “the present economic and fiscal situation”.
In its opening statement the institute notes that investment in residential construction here slowed noticeably in 2022. “Ireland was among the countries with the lowest investment in housing in the EU in 2022, only exceeding Greece, Poland, and Bosnia and Herzegovina,” it says. “As a result the rise in house prices and rents is likely to continue, albeit at a slower pace in the case of house prices.”
The institute warns that demand for housing would continue to exceed the supply over the medium-term. Despite reaching a 16-year high with 32,695 completed units in 2023, housing supply remains insufficient, it says.
While current estimates of structural demand for housing in the Irish economy is put at 35,000 units per annum, this underestimates “the actual needs for housing” because of higher immigration numbers, the ESRI says. “By the end of April 2023 Ireland measured the highest population growth since 2008, which underlines the argument that structural housing demand will be revised upwards.”
ESRI researchers are currently working on a new estimate of housing demand which is due to be published in April and which will go towards revised State targets.
In its submission the institute notes the Irish economy “has weathered challenges such as Covid-19 and inflation well and we believe that the macroeconomic outlook for 2024 points towards continued, modest growth”. However, it warns that the economy’s increasing “dependence on a small number of very large firms is again becoming more evident”.
It highlights the pharmaceutical and ICT sectors which have seen significant growth in both value-added and employment in recent years. “As mentioned in several commentaries, the exceptional performance of these sectors makes the domestic economy vulnerable to a significant correction or contraction in either sector,” the ESRI says, while noting these sectors are behind the current slump in GDP (gross domestic product).
“This concentration of risk is even more important in regard to corporation tax receipts as this has an impact on fiscal policy and the domestic economy. In this regard the announcement to establish the Future Ireland Fund and the Climate and Nature Fund in the recent budget is commendable.”
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