There will be no major uptick in housing supply this year or in 2026 with Government targets set to be missed over both periods, the Economic and Social Research Institute (ESRI) has told an Oireachtas committee.
Officials from the ESRI, appearing before the committee on budgetary oversight on Tuesday, said a tight labour force in the sector and low productivity levels – particularly among small and domestic-owned construction firms – mean the outlook for housing remains bleak.
Conor O’Toole, associate research professor with the ESRI, said these factors, coupled with the out-turn for 2024 and the first quarter of 2025, mean the group does “not foresee any major uptick in 2025 and 2026 in housing supply”.
He said the ESRI is currently forecasting 33,000 units in 2025 and 37,000 units in 2026, which would be well below Government targets of 41,000 this year and 43,000 next year. Furthermore, Mr O’Toole added most of the risks “weigh on the downside”.
RM Block
On energy, Mr O’Toole pointed out that while prices have declined since outset of the war in Ukraine, Irish prices “remain at high levels”.
“Prices for electricity in particular have not yet declined to the same extent as other EU countries,” he said.
“It is challenging to confidently identify the reasons for this, but prices are still largely driven by gas prices, and Ireland has not diversified away from using gas to generate electricity to the same extent as other EU countries.”
The ESRI has revised its growth forecast downwards due to international developments, he said. Its forecast for growth in modified domestic demand (MDD) was 3 per cent in its Spring Quarterly Economic Commentary, but this is now 2.3 per cent.
For 2026, the ESRI has adopted a “technical assumption” that tariffs settle at moderate levels, in line with the IMF forecasts. This would lead to a possible growth rate in MDD of 2.8 per cent.
Under the 10 per cent tariff scenario, the results show a negative impact on Irish GDP of up to 2 per cent and on MDD of 1.5 per cent over a period of five to seven years.
Under a more severe 25 per cent tariff scenario, the negative impact on GDP is 3.5 per cent, while MDD is projected to decline by 3 per cent.
Mr O’Toole said that while Ireland has limited direct influence over EU-US trade policy, there is a need for “strong domestic policy responses”.
On the “outsized contribution” of corporate tax revenues, he warned recent government surpluses “would have been substantial deficits” without windfall corporation tax revenues that are concentrated in a small number of taxpayers.
“While the establishment of the investment funds is extremely welcome, increasing the level of throughput from windfall payments to the funds would be advisable,” he added.
