2 days Ago By Irishexaminer.com
The Central Bank of Ireland has warned an additional €7bn in financing will be needed a year to increase the supply of new homes to 52,000 annually, with “significant economic costs” expected if action is not taken. In a report published on Tuesday, the Central Bank said previous estimates of annual housing needs for the period 2020 to 2029 — based on population data from 2018 — ranged from 34,000 to 45,000 units a year. However, population growth has been faster than envisaged.
According to the report, to get Ireland to a headship rate — the proportion of individuals in an age cohort that list themselves as “head of household” — down to a comparable level with the UK, annual home construction would need to increase to 52,000 a year through to 2050. To get the rate down by 2035, 67,000 new homes would need to be built a year. These estimates are based on a high migration scenario.
According to the Central Statistics Office, just under 32,700 homes were built last year. Pent-up demand The Central Bank said pent-up demand existed alongside an increased housing need from higher population estimates over the coming decades. Director of economics and statistics at the Central Bank Robert Kelly said housing supply was “unable to meet our country’s needs” and was “limiting the sustainable growth of living standards”.
Mr Kelly said there were “significant economic costs of policy inaction” in this area, which will “result in a higher cost of living, and in turn, a higher cost of doing business in Ireland, ultimately damaging our global competitiveness”. The report said funding for 52,000 homes a year would “require sustainably accessing debt and equity financing of sufficient scale”, with the bank estimating €6.5bn to €7bn additional development finance over and above existing levels.
The State already contributes €6.5bn to housing a year. However, money is not the only constraint, with the Central Bank noting the protracted planning environment adds to the costs of delivering housing, while capacity and productivity issues within the construction sector is also a problem.
Irish economy resilient In its latest economic bulletin, also published on Tuesday, the Central Bank said the Irish economy was resilient and is poised to grow by between 2% and 3% out until 2026. Unemployment is expected to remain low, supporting a rise in wage rates and broader household incomes, while headline inflation is expected to remain between 1.5% and 2% over the next few years.
However, while the economic outlook is favourable, there are still risks. The bulletin said further fiscal stimulus above the assumed forecasts would result in the economy growing faster, which could “come at the cost of higher and more persistent inflation, with a negative effect on Ireland’s relative competitiveness”. Ireland’s dependence on a small number of multinational companies also leaves the country exposed to a downturn in one sector having a dramatic impact on domestic investment, tax revenue and economic activity.
.
