Housing shortage poses risk to Irish economic recovery

PUBLISHED : Tuesday, 18 August, 2015, 9:53pm
UPDATED : Tuesday, 18 August, 2015, 9:53pm

A housing shortage and the possibility of Britain leaving the European Union are among the key economic and social risks to Ireland's economic recovery, a government report said.

The Irish economy is forecast to be the fastest-growing in Europe for the second year running, a dramatic recovery from a property and banking crash that prompted the government to start issuing annual risk assessments.

This year's report highlighted the increasing mismatch between household formation and housing supply with fewer than 10,000 units being built each year since 2011 compared with an average of 23,000 during the 1970s, when Ireland was a much poorer country.

Average Dublin rents climbed 9.6 per cent in the year to March, according to the latest statistics from the Private Residential Tenancies Board, and are less than 5 per cent below their 2007 peak.

"Improving housing supply is both an immediate issue of concern - with lack of supply leading to higher rents, increased pressure on social housing and increased homelessness - and one of long-term strategic importance," the report said.

"A lack of housing and associated high prices and rental costs could also affect Ireland's attractiveness for inward investments and skilled immigrants."

The report also highlighted the economy's "heavy dependence on a relatively small number of multinational corporations", leaving employment, economic growth and tax revenues vulnerable to changes in Ireland's attractiveness as a location for those companies.

On Britain's planned EU membership referendum, the report said a fundamental change to the role of Britain in the EU, or a period of continuing uncertainty, could present significant challenges for the union and Ireland in particular.

It emphasised Britain's position as an important ally within the EU on negotiations, Ireland's significant economic and trading ties with its nearest neighbour, and the impact any changes would have on British-controlled Northern Ireland.

Other risks identified included the high level of household debt in Ireland - second highest in the euro zone - and the 60 per cent of all unemployed people who have been out of work for more than a year and might not share in the recovery.