House prices and rents are expected to continue increasing with demand exceeding supply in the medium term, the Oireachtas Committee on Budgetary Oversight has heard.
Dr Kieran McQuinn of the Economic and Social Research Institute (ESRI) outlined economic data indicating a more positive general outlook than had been anticipated last year.
Among record levels of employment and a now favourable domestic macroeconomic outlook for 2024, the country’s housing crisis continues to cast a shadow, however.
At the Oireachtas committee on Wednesday, addressing the Pre-Stability Programme Update, Dr McQuinn highlighted the housing market as one area in which the economy is likely to face continued pressure.
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Despite an upward underlying trend in home build completions, he said, new population estimates due later this year mean demand is likely to be revised upward.
“This means that the demand for housing is likely to exceed the supply over the medium term,” he said.
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“As a result, house price inflation and along with increases in rents are likely to continue, albeit, in the case of house prices, at a slower pace than was the case in 2022.”
Dr McQuinn told the committee that between 26,000 and 28,000 housing units are expected this year, a level rising to in excess of 30,000 in 2024.
An impending supply-demand imbalance is based on estimates, although Dr McQuinn said demand was likely to reach in excess of 35,000 to 40,000 units, or possibly higher.
“You are going to see an imbalance I would say, a continuing imbalance over the next two to three years I would say at least.”
Asked by Sinn Féin finance spokesman Pearse Doherty how this might affect homelessness, Dr McQuinn said this has not been explicitly forecast by the ESRI but “certainly as long as rents continue to increase and as long as you have that imbalance you are going to see continued pressures as far as homelessness is concerned”.
Indeed recent activity levels have been somewhat stronger than we would have expected going into the winter months— Vasileios Madouros
According to the ESRI, the pace of growth across most western economies in the first quarter of 2023 has been stronger than expected and a modest decline in inflationary pressures has relaxed fears of international recession.
Further improvements in the public finances are also expected, Dr McQuinn said, with a significant surplus and a further reduction in debt to GDP. International and domestic inflation rates are set to be “notably lower” than had been expected. The ESRI favours a site-value tax, rather than concentrating tax on labour.
On the medium-term fiscal outlook, Vasileios Madouros, deputy governor of the Central Bank of Ireland, said that while macroeconomic conditions were still challenging due to inflation, the economy had proven resilient.
“Indeed recent activity levels have been somewhat stronger than we would have expected going into the winter months,” he said.