Housebuilding in Ireland is faring better than initially anticipated, despite recent interest rate hikes, according to a report by Goodbody economists. The report, titled “Embarrassment of Riches,” suggests that the Irish government has a range of options to address the housing crisis. Dermot O’Leary and Shaun McDonnell, who conducted the “health check” on the economy, project that 30,000 homes will be completed in 2023 and 2024 as the government intensifies its efforts to tackle the crisis. However, they caution that the market will likely continue to experience acute undersupply for some time.
The economists note that the mobilization of state activities, including local authorities, approved housing bodies, and the Land Development Agency, will partially offset the withdrawal of some private landlords from the market. Nevertheless, they warn that this level of supply is insufficient to keep up with the growing population and the pent-up demand accumulated over the past decade.
Goodbody’s projections indicate that apartments will play a significant role in the construction of 30,350 new homes next year, slightly surpassing this year’s levels and exceeding the 21,110 homes completed in 2019 before the pandemic. The report also forecasts that interest rate hikes will keep house price inflation stable across the country this year, with a 3.8% increase expected in 2024.
In Dublin, where prices rose by almost 6% in 2022, a decrease of nearly 1% is projected for this year, followed by a 4.2% increase in 2024. Outside of Dublin, where prices increased by over 9% last year, a 1.7% rise is expected in 2023, followed by a 3.7% increase in 2024. As a result, the average house price in Ireland is predicted to be €346,460 this year and rise to €359,780 in 2024.
The term “embarrassment of riches” in the report refers to the substantial corporation tax receipts flowing into the exchequer, which will result in the largest budget surplus in the eurozone for the Irish government, amounting to €12.4 billion in 2024. The report also highlights that the resilient Irish economy is expected to grow by 2.6% this year, according to the modified domestic demand measure, compared to a previous forecast of only 0.7%.
The economists emphasize that the robust government and household balance sheets serve as important assets for the Irish economy, positioning it well in the face of ongoing risks in the global economy and higher interest rates. The report also notes that business investment levels in Ireland appear to be holding up, aided by the construction of data centers and microchips. The country’s status as a recognized hub for this rapidly expanding sector highlights the need to prioritize improvements in energy infrastructure while considering sustainability objectives, according to the Goodbody report.