Watchdog says high cost of homes risks jobs as NTMA warns on fallout
Published 08/07/2016 | 02:30
The lack of affordable housing is undermining overall competitiveness and Ireland's attractiveness as a base for foreign investment, the State's competitiveness watchdog warned.
A survey of international cities found just two - London and Amsterdam - less affordable for home buyers than Dublin.
The report on the economic impact of housing costs by the National Competitiveness Council (NCC) says high rents and house prices impact on the attractiveness of Ireland as a location for investment.
It also warned that high housing costs "directly impacts on enterprise costs through wage effects".
In some Irish cities, including Cork and Galway, rents are now even less affordable than buying, the report said.
Lack of affordable housing will hamper efforts by the IDA and other agencies to secure new foreign direct investment (FDI) expected to flow out of the UK in the wake of the uncertainty caused by the Brexit vote there. In addition, workers' need for higher wages to pay rent and mortgages is indirectly driving up the cost of Irish goods and services, the report said.
It comes as Ireland's competitiveness is already under serious pressure from the collapse in sterling following last month's Brexit vote.
This is driving up the cost of Irish goods and services for buyers in the vital UK market.
The NCC said rents and house prices have risen sharply since the bottom of the crash.
Building more houses and bringing vacant properties back into use are identified as solutions.
"There are new opportunities for Ireland to attract additional FDI given Britain's decision to leave the EU, but insufficient accommodation options for employees and their families will make Ireland less attractive for investment," said Mark O'Mahoney of Chambers Ireland.
The National Treasury Management Agency (NTMA) also warned Ireland is likely to suffer an economic hit from Brexit. In a presentation aimed at investors in the bond markets, who lend to the State, the agency said Irish banks can expect to suffer because of their operations in Britain.
The agency said a recession in the UK in the wake of the Brexit vote last month would likely spread to Ireland, slowing growth here by next year.
Meanwhile, rating agency S&P warned yesterday that Ireland could lose its 'A' credit rating over the long term if changes aren't made to meet costs associated with an aging population, including pensions and healthcare.
"The Irish government has been proactive in reforming its pensions policy, but faces significant challenges in modifying health care policy while maintaining the adequacy and sustainability of health care expenditure," S&P Global Ratings said.