DBRS Morning Star reported that the Republic of Ireland (rated AA (low) Stable) is facing persistent housing challenges, with high building costs emerging as the latest threat to housing supply. The country has been struggling with supply shortages and high property prices, a situation contrasting with the previous crisis caused by credit-fuelled oversupply. Years of insufficient housing investment have rendered renting or purchasing property increasingly unaffordable for many.
The report stated that recent government efforts to ease planning rules and incentivise builders have led to gradual improvements, with housing completions rebounding in 2022 and property price growth moderating. However, the global price shock last year and the subsequent increase in construction costs could undermine efforts to accelerate new housing supply, exacerbating the social and economic consequences of unaffordable housing in Ireland.
Jason Graffam, Vice President of Sovereign Ratings Group, commented on the situation in the report, saying, “Recent shocks disrupted global supply chains and increased the cost of fundamental inputs to building and construction materials, threatening the rebound in housing supply in Ireland. Comparatively expensive housing in Ireland may place a drag on its growth model over the medium-term.”
The report further claimed that to address the supply-demand mismatch and maintain Ireland’s competitiveness, as well as to accommodate more workers and taxpayers, the government may need to direct additional structural public spending on housing measures.