House building is set to fall even further behind demand based on new forecasts that put the number of extra homes needed at a higher level than previously thought.
The Economic and Social Research Institute says that demand for new homes will grow to more than 30,000 a year within eight years.
Under the Government’s current housing plan, a target of 25,000 per year has been set for the coming years but nowhere near that number has been provided this year and there are doubts that the figure can be reached next year either.
Population growth, fuelled in part by net immigration which returned this year for the first time since 2009 and is likely to strengthen because of Brexit, will be the key driver of demand.
Apart from the challenges for the construction industry, the ESRI says domestic banks would struggle to provide the necessary level of credit without affecting safeguards around deposit to loan ratios.
In a report published today, the ESRI warns: “Results of our analysis suggest that in the future the traditional deposit base will be unable to fund the level of credit required to meet the housing demands of the economy. This will require significant changes in the domestic financial sector.
“Given the calamitous events of the past decade, a significant expansion in the lending capacity of the domestic banking sector will immediately give rise to concerns about the emergence of another credit- fuelled bubble.”
It suggests there may be a case for the entry of foreign banks into the Irish retail banking sector.
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