The Economic and Social Research Institute (ESRI) is set to inform the Oireachtas Committee on Budgetary Oversight that property prices and rents are expected to rise continually in the upcoming years. Several representatives from the institute will meet with the committee to discuss the current economic and fiscal conditions. In its introductory remarks, the ESRI underlines a significant deceleration in residential construction investment in Ireland in 2022. It says Ireland was one of the least investing EU countries in housing, only surpassing Greece, Poland, and Bosnia Herzegovina. Consequently, the upward trend in housing and rental prices is projected to persist, though the pace may be slower for house prices.
The institute is concerned that medium-term housing demand would still outpace supply. Despite the completion of 32,695 residential units in 2023 – the highest in sixteen years – housing supply is still lacking, according to the ESRI. Current projections place structural housing demand in the Irish economy at 35,000 per year. However, the ESRI points out that these estimates fall short of actual need due to increased immigration. As of April 2023, Ireland recorded the largest population growth since 2008, supporting the notion that structural housing demand must be adjusted upwards.
ESRI researchers are preparing a fresh housing demand metric to be released in April, which would contribute to revised government targets.
In its statement, the ESRI recognises that the Irish economy has proven resilient against challenges like Covid-19 and inflation. It predicts a conservative economic growth for 2024. Nonetheless, it aired concerns about the economy relying heavily on a handful of large corporations. This trend is highly visible within the thriving pharmaceutical and ICT sectors.
The ESRI warns that the domestic economy may be susceptible to significant adjustments or contractions in these sectors, particularly as they are linked to the current GDP slump. The institute further underlines the importance of this risk concentration concerning corporation tax receipts since it significantly impacts fiscal policy and the integral economy. Commendably, the recent budget has set up the Future Ireland Fund and the Climate and Nature Fund, according to the institute.
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