Ireland needs 85,000 new homes a year to address ‘structural shortfall’ – Davy

Ireland needs to build almost 85,000 new homes a year to address the structural shortfall in housing and the expected population growth over the next 10 years, according to to Davy Stockbrokers.

In its latest economic commentary, the brokerage said the Irish economy was “on the cusp” of another period of rapid growth, helped by lower inflation, foreign direct investment (FDI) and high-skilled job creation.

Davy said it expected the Republic’s population to grow to 5.9 million by 2030, which would be 524,000, or 10 per cent, ahead of the Government’s National Planning Framework (NPF) baseline of 5.36 million.

“This forecast has significant implications for housing demand over the coming years,” it said.

It calculated that closing Ireland’s per-adult housing shortfall compared to other European countries based on these population projections would require just under 85,000 units a year until 2030, or 2.6 times the 2023 level of completions (33,000).

“This illustrates the scale of Ireland’s structural housing shortage if, as we forecast, the population reaches 5.9 million by 2030,” it said.

“Even at the height of the property bubble, Ireland had only begun to catch up with other European countries in terms of housing,” it said. “However, the distribution of many new-build units around the country during the 2000s was not well-aligned to where demand for homes was highest,” the company said.

It forecast new dwelling completions would increase to 36,000 units this year and 42,000 next year while noting this was still well short of the State’s “underlying housing need”.

In terms of the economic outlook, Davy said Ireland’s economy has remained resilient “and looks set to grow rapidly over the coming years”.

It expects a “broad-based acceleration of economic growth”, as measured by the Central Statistics Office’s bespoke gross national income (GNI*) measure, to 4.5 per cent in 2024 and 4.3 per cent in 2025, up from 3 per cent last year.

The forecast was underpinned by “above-consensus” employment growth of 2 per cent this year which would be helped by FDI and what it called “skilled inward migration”.

Lower inflation of close to 2 per cent would also provide a boost to consumer spending growth, which is projected to accelerate to 4 per cent this year.

The brokerage warned, however, that buoyant activity levels have put pressure on Ireland’s infrastructure. “Threats to competitiveness must be tackled to avoid a slowdown in FDI and job creation,” it said.

Davy also warned that with demand in the economy strong, inflation “could be reignited” if the Government pursues another expansionary budget.