Ireland’s economic competiveness is being negatively impacted by a shortage in housing, as noted by the Economic and Social Research Institute (ESRI). Awareness and concern over this issue is growing among multinational corporations. During a recent briefing with the Oireachtas committee regarding the preliminary stability programme update, which lays the groundwork for the Budget 2025, ESRI’s research professor Kieran McQuinn discussed several implications of the housing crisis.
McQuinn pointed out that the climbing house prices are unlikely to stop given that the supply, although growing, remains insufficient to cover not only the natural demand but also the existing backlog. He emphasised the dilemma this housing deficit poses on economic competiveness, especially given various multinational companies citing it as a significant hurdle. McQuinn explained that these firms, which often offer the best salaries, express concerns when a significant chunk of these incomes have to be used for housing expenses.
McQuinn traced part of the housing crisis root cause to changes that occurred in the mortgage and banking sector post-financial crisis. The credit levels offered by financial institutions aren’t sufficient currently due to regulatory changes, making it a challenge for them to meet the demand moving forwards. This situation has opened a financing gap, compelling the Government to step in and fill it. This, however, strained the private sector due to the high-interest rate environment.
McQuinn further advised that both public and private sectors are needed to fill the glaring supply gap. While the Government is leading the efforts at the moment, it might not be sustainable considering the volume of the supply increase needed. He deliberated the need for increased basic funding in the market and mentioned the importance of institutional funds too. He cautioned, however, these shouldn’t be allowed to dominate housing estates, emphasising the need for diverse funding sources.
In a separate statement, Professor McQuinn indicated that employees could anticipate “actual wage growth”, in which salary enhancement surpasses inflation, due to occur this year “for the first time in a significant duration”.
He further mentioned that the rate of household savings, which reached peak numbers between 25 and 30 per cent amid the Covid-19 predicament, had provided a cushion for consumers till the present, but these reserves have now more or less depleted. He went on to say that the household savings percentages have reverted to the usual rates before the Covid era, which were roughly around 10 per cent.
– Tune into our Inside Politics Podcast for the freshest scrutiny and discussion
– Register for immediate alerts and get the top news, insight, and interpretation straight to your mobile
– Visit The Irish Times on WhatsApp and keep abreast of things.