DBRS Morningstar, which was alone among the world’s four main credit ratings agencies to keep an A-rating on the Republic during the financial crisis, said that correcting a shortage of housing in the State is “key” for it to remain competitive in the global economy.
Years of inadequate housing investment has meant renting or purchasing property has become increasingly unaffordable, DBRS noted in a report on Wednesday.
“Government efforts in recent years to ease some planning rules and incentivise builders have yielded gradual positive results. Housing completions rebounded in 2022, and property price growth has started to moderate mainly due to inflation-constrained buyers and macroprudential policies,” DBRS said.
“That said, last year’s global price shock and the resulting high input construction costs may frustrate efforts to accelerate new housing supply and exacerbate the high social and economic costs of unaffordable housing in Ireland.”
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DBRS said that while successive governments have passed measures to try and ease the housing challenges, including levies on vacant property, tax incentives for developers, and reforms to planning and zoning laws, it noted that the whole cost of wholesale building and construction materials jumped by 35 per cent between 2020 and 2022 – weighing on completions.
“Key building materials such as timber, up 64 per cent over the same period, steel, up 51 per cent, and cement, up 25 per cent, were already on the rise prior to Russia’s invasion [of Ukraine],” it said.
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The current state of the housing pipeline indicates that some 27,000 new homes will be completed in 2023, down from almost 30,000 last year, according to Banking & Payments Federation Ireland (BPFI).
While the Government’s Housing for All plan, unveiled in late 2021, is aimed at the delivery of an average 33,000 homes a year in the nine years to 2030, the Tánaiste Micheál Martin conceded last week that 40,000 new units are needed every year for at least seven years to catch up on population growth.
Housing unaffordability can aggravate difficult social outcomes in Ireland, DBRS said.
According to the European Commission, the average cost for housing in Ireland was 88.5 per cent higher than the EU average in 2021. A Residential Tenancies Board (RTB) survey from the same year showed half of Ireland’s tenants direct more than 30 per cent of income towards paying rent, while 12 per cent spend more than half of their income.
Some 11,754 people in the State were living in emergency accommodation as of January 2023, the highest since records began in 2014, according to figures form the Department of Housing.
“Comparatively expensive housing may also place a drag on Ireland’s growth model over the medium-term,” DBRS said.
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“The economy is highly open and welcoming of the free flow of trade and people, and while its strong competitiveness depends on many factors – including its proximity to Europe’s large single market, its skilled workforce, and the strong governing institutions – the housing affordability crisis could make the country a little less attractive to future foreign capital inflows.”
DBRS has an AA-low rating on the Republic’s creditworthiness,
