The lack of affordable housing is impacting on Ireland’s competitiveness and could affect the country’s ability to attract investment, a leading advisory body has warned.

In a new report, the National Competitive Council (NCC) says that there is no quick fix available to solve the housing crisis, which has seen rental costs soar and left would-be buyers locked out of the property market.

A survey of 11 international cities undertaken by the council shows just two - London and Amsterdam - were more costly for home buyers than Dublin. In addition, only three other cities were found to be less affordable in terms of rent as a percentage of income.

The report also shows that in many Irish cities, such as Cork and Galway, those in rented accommodation are now typically paying more in rent than they would for a mortgage.

“Affordability is increasingly challenging for renters who aspire to purchase and must save a significant deposit whilst simultaneously paying relatively high rents,” the report authors said.

The NCC said housing affordability is a key component of competitiveness.

“It impacts upon the attractiveness of Ireland as a location for investment and directly impacts on enterprise costs through wage effects, and indirectly determines the price of Irish goods and services,” it said.

“A well-functioning housing and construction sector is critical to the overall health of society and the economy,” the report’s authors added.

The NCC said a long-term approach needs to be taken to ensure a sustainable housing market with increased supply required to address growing demand and dampen house prices and rent increases.

"To incentivise increase supply, prices need to exceed costs. However, as a result of the Central Bank mortgage rules, prices are, in effect, capped relative to incomes. Therefore, there is a need to better understand the elements constraining supply and to then reduce development and construction costs relative to income and prices," the authors said.