Yahoo Finance Shadow of 2008 bust hangs over Ireland's Brexit-fuelled house-building plans
The Irish government has made it a top priority to solve the country’s housing crisis and build new homes, but is acutely aware of avoiding another boom-bust cycle, according to Ireland’s finance minister Paschal Donohoe.
Speaking at an event in London on Friday morning, Donohoe said the rebound in the Irish economy — combined with the “hyper interest” of companies to grow in the country — has fuelled the housing crisis and pushed the government to focus its long-term spending on this area. Tax policy and land-planning are being adapted in an effort to build more homes in an economically sustainable fashion, he said.
Brexit-ing firms looking to move operations and jobs to Ireland have become both a blessing and a curse. Brexit has directly led to the creation of 4,500 new jobs in Ireland, according to recent statistics from the country’s development agency, IDA Ireland. There is also a record number of people currently employed by multi-national companies in the country, with giant firms like Google (GOOGL) attracted to Ireland’s low tax rates and business-friendly culture.
However, this situation has created further pressures on tight housing supplies and actually started repelling new companies.
Michael Carey, the chair of Ireland’s Housing Agency, said last year that the scale of the Dublin housing crisis has begun to limit the city’s ability to reap a Brexit dividend.
A recent report by the American Chamber of Commerce in Ireland said that “housing is one of the most critical pressure points when looking at recruitment for expansion” in the country. It pointed to an “inability of supply to meet demand [that] has been particularly acute since the end of the recession in 2011.”
Donohoe said that as he pushes to invest in expanding Ireland’s housing supply, he’s “acutely aware” that previous governments have failed to avoid housing market bubbles, yet he is trying to learn from past mistakes.
Donohoe said he’s thrown his “absolute support” behind the Central Bank of Ireland, which has clear mortgage lending rules and policies that should help the country avoid a repeat of the 2008 housing market bubble.
“A key point of difference [from] our past” is limits on easy money in the Irish economy, the finance minister said, noting that available credit is at a “fraction” of the level it once was.
His decision to raise taxes on commercial property and the hospitality sector is another part of a strategy to help direct more funds towards solving the housing crisis, he said.
Government reforms of real estate planning laws and planning processes are also designed to help ease the housing crunch, Donohoe said.
Ireland’s financial services firm Goodbody estimates that nearly 18,900 new homes were built in Ireland last year, which was in line with forecasts. It predicted in a report in February that another 22,000 new homes would be finished in 2019 and 25,000 new homes would be built in 2020.
“Having grown fourfold since 2013, there has clearly been significant progress in growing output, but problems remain in terms of viability, breadth of activity, and affordability,” Goodbody said in the report.
