The inflow of people from abroad added around 5 per cent to house prices last year and created further demand for around 6,000 homes, a leading economist has said.
Mr John FitzGerald, senior economist with the Economic and Social Research Institute (ESRI) warned that rising house prices has meant that people are getting into the market far earlier in their careers than they might have, because they fear they will be left behind. He said it is putting "phenomenal pressure" on the economy to deliver.
Addressing a conference on housing in Dublin, Mr FitzGerald said the solution to the problems in the housing market can only lie in increasing supply. "While measures such as a property tax or other measures which served to delay people's entry into the housing market could have a limited impact on the current excess demand, they will not cure the root cause of the problem," he said.
Mr FitzGerald called for a substantial increase in the supply of available land. However, he predicted that even if this happened immediately it will be several years "`before relief becomes apparent". Mr David Cantwell, of Hooke & MacDonald, estate agents, told the conference that a combination of skill shortages, increasing building costs and high site costs and planning delays will lead to rising prices "that will continue to push housing beyond the reach of many categories of people". He said they will inevitably look to the rental market "which is under enormous strain".
He said there had been a dramatic fall-off in the number of investors buying apartments for letting over the summer and this will further deplete the supply of apartments for rent in the immediate future.
Mr Cantwell said unless radical action is taken to increase supply, companies locating or expanding in Ireland will find it increasingly difficult to attract staff because of the shortage and cost of top quality accommodation. "This will seriously affect inward investment," he said.
Mr Cantwell said both apartments and houses will increasingly become two-tiered - one tier supporting people seeking affordable accommodation - many of them first time buyers. "This sector will inevitably have to settle for relatively modestly sized accommodation with the minimum of special features," he said.
"The other tier would cater for those who could afford a step up from the run of the mill," he added.
Mr Ciaran Ryan, senior housing executive, Construction Industry Federation, said there was a urgent need for increased housing densities, land rezoning and changes in the planning system. He called for the Government's current review of planning procedures to be more than just a "tweaking" of the current system.
