Goodbody Housing Report Summary
The construction industry in Ireland is accelerating growth in the Irish economy, with Ireland now having one of the fastest growing economies in the Eurozone. However, this accelerating economy can cause the economic discipline required to keep things stable to slip.
With major tech multinationals locating their headquarters in Ireland, there is a fear of “Dutch disease”, where the booming tech industry causes a decline in other major industries. However, the construction industry’s contribution to employment would suggest this is not the case here, being the second largest industry in Ireland for employment.
Furthermore, Ireland’s unemployment rate is at its lowest level since 2008, at 5.3%. Growth in FDI, as well as a large amount of Brexit relocations to Ireland, has led to a large amount of these jobs concentrated in cities, mainly Dublin. While this is good for employment, it has led to a housing crisis in the city. Building targets are not being met, yet the supply of unsold houses is growing. The reason for this is simple, the focus is on the wrong area of the market, and has not been on viability or affordability.
The Main Issues
In previous years, the number of apartments built has been disappointingly low, despite serious demand. This, however, can be attributed to some discrepancies in planning permission which were rectified in 2018. Since then, the number of apartments has inclined rapidly.
While one third of the population earns enough in their yearly salary to fall into the €205k and under mortgage bracket, only one in five houses cater to this market. The majority of houses available fall into the €205k to €287k mortgage bracket, which does cater for a broad portion of the market. However, outside of this, the focus is on catering to a more expensive house market, despite the demand being for affordable houses. There is very little focus on affordable homes, which is worrying if your household earns €50,000 or less per year. The previous solution to this issue in Ireland was to loosen credit, and offer larger mortgages, with devastating results for the economy.
The focus should be on providing suitable accommodation rather than pushing householders into a more expensive mortgage, to avoid history repeating itself. While we may have an oversupply of unsold houses, it is clear we are not building to meet demand. There is a complete disregard for the actual market, instead focusing solely on more expensive accommodation that suits a very small portion of the population.
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