In its latest assessment of Ireland since the bailout, Brussels also suggests that Irish Water could improve its explanation to the public to increase the acceptance of water charges.
The report suggests that growth in the economy is set to remain on track into next year but that the housing shortage could become acute as the numbers living here increase.
EC officials note that the revaluation of properties has been postponed by three years until late 2019. It notes the last valuations were in 2013 and residential property prices have increased substantially since then, so “the delay represents a lost opportunity to broaden the tax base”.
The report suggests that extending the tax to cover non-agriculture land “would also broaden the tax base and enhance the efficiency of land use”.
“The latter points should be of particular interest given the lack of housing,” it notes.
On water charges, Brussels says acceptance of the levy for homeowners could gradually improve. It adds: “There is a need for Irish Water to better explain the necessity to improve infrastructure to the public to increase acceptance of water charges, and to meet its commitments to improve service, deliver significant efficiency gains and reduce costs”.
It also says, while 745,000 households made a payment during a second billing cycle, compliance rates remain low given the total customer base of about 1.5m households.
Overall, the report states that Ireland’s economic rebound is “remarkably strong” but that the challenge in the years to come is to prevent the risk of “boom to bust cycles” and address “housing and possible infrastructure bottlenecks”.
Growth is largely driven by strong investment and private consumption, it adds.
Moreover, exports are growing swiftly here thanks to the weaker euro and trade links to the US and the UK.
As highlighted by the Irish Examiner last week, the EC warns in its report that Ireland’s moves to reduce its debt may be affected by the Government’s recent budgetary decisions, with extra spending.
“Recent fiscal policy decisions are influenced by the current political context,” it says.
Officials also add: “Spending increases focus on public wages and social benefits rather than on more growth-friendly expenditure items.” Mortgage arrears are still high in Ireland despite recent measures to help homeowners, Brussels also tells Dublin, adding that increased numbers returning and living here could increase housing problems.
“Supply constraints in housing and infrastructure could become more accentuated as the country is likely to return to positive net inward migration and government investment expenditure is set to recover only very gradually.”
Recent measures to monitor and restrict rent hikes over the next two years must also be monitored to ensure investment in the sector is not affected, Brussels says.