Brexit fallout will add to chaos in our troubled housing sector, says ESRI
Warning that more families will need State help to pay rent, while demand for new homes set to drop
Brexit will spark chaos in our troubled housing sector, with rents spiralling and more families needing support.
Two different bodies are set to outline how rent increases are likely to be exacerbated after the UK leaves the European Union.
However, the growth in house prices may actually drop - as an adverse impact on the domestic economic lowers workers' ability to get on the property ladder.
The ESRI believes the country should be braced for private sector construction to drop, meaning the Government will need to invest more in social housing.
Separately, the Nevin Economic Research Institute will tell TDs and senators that "greater fluctuations" in housing demands are ahead.
Both bodies will give briefings to the Oireachtas Committee on Housing today.
The Economic, Social and Research Institute (ESRI) believes the country should be braced for Rent Pressure Zones to be reviewed, and more families needing State help to afford rent.
However, it believes that hikes in mortgage interest rates could be limited.
In his opening statement, Kieran McQuinn, research professor and head of economics at the ESRI, will describe the threat to the Government’s existing policy on housing.
He will point to the Housing Assistance Payment (HAP), which will soon be the main income-related support for private renters.
“If income and employment growth are slower than anticipated due to Brexit, the numbers of families that qualify for HAP over the coming years will likely be higher than currently expected,” Mr McQuinn will say.
A key target of the Government’s ‘Rebuilding Ireland’ project is to have more than 20,000 houses built every year.
However, Mr McQuinn will caution that “greater uncertainty” due to Brexit “is likely to result in lower housing demand and supply”. There will also be major implications home financing.
The ESRI highlights that mortgage arrears are still an issue in the Irish market.
After Brexit, income, employment and house-price levels will be less than otherwise expected, meaning “the rate of decline in mortgage arrears is likely to slow”.
“This, in turn, will have implications for the non-performing loan levels on the balance of Irish financial institutions, which will impact their performance going forward,” Mr McQuinn’s statement predicts.
However, he adds that Brexit may also slow the extent to which the European Central Bank (ECB) will increase mortgage interest rates.
“This would improve affordability in the Irish mortgage market,” he will say.
Separately the Nevin Economic Research Institute will tell TDs and senators of “significantly regional differences in the impact of Brexit on the Irish housing market”, with “particular pressure on the rental sector in the Greater Dublin Area”. Rents in the capital are already 36pc higher than at the peak of the Celtic Tiger boom.
It comes as the Brexit talks go down to the wire, with the EU insisting that the UK agrees to a ‘level playing field’ if they are permitted to enter a UK-wide customs arrangement.
In particular, Michel Barnier’s team are understood to have warned that the UK must abide by EU environmental and labour laws for the duration of the agreement.
Mr Barnier briefed EU foreign minsters yesterday on progress, telling them “as in any negotiation, the final stretch is always the most difficult”.
He reportedly said in the meeting that “the parameters of a possible agreement are very largely defined” but still require political endorsement.
But Downing Street said that reports that the “parameters” of a deal will be presented to ministers today for approval should be taken “with a bucket of salt”.
The former French minister met privately with Tánaiste Simon Coveney afterwards to provide a more detailed update on the negotiators relating to the Irish Border.
Mr Coveney said support “is stronger now than it has ever been” for the Irish position that a ‘backstop’ must ensure no hard Border can emerge on the island of Ireland under any circumstance.
“The issues aren’t new. There is still clearly work to do but between two negotiating teams. We need to give them the time and space now to finish that job,” he said.
This is likely to be create further difficulties for UK Prime Minister Theresa May as many MPs will argue this amounts to being ‘trapped’ by EU rules when they want to negotiate new trade deals.