Housing mess set to wipe any Brexit benefit

The recently-published analysis on the potential impact of Brexit on the Irish economy, which was commissioned from Copenhagen Economics by the Government, makes for sober, but not surprising, reading.

The analysis suggests that Brexit has the potential to reduce the size of the Irish economy by between 2.8% and 7% by 2030.

In the event of a ‘hard’ Brexit, with World Trade Organisation tariff rates applying once the UK leaves, average annual growth out to 2030 is predicted at 1.7%, compared to 2.2% in the event of no Brexit.

This would represent a loss of 7% of GDP. Forecasting the path of an economy out to 2030 is obviously not a precise science, to put it very mildly, but it is important to try to model what might happen in certain scenarios.

It is blindingly obvious that Brexit will be bad for Ireland. It is just a question of how bad.

It does not take a rocket scientist to figure out that if the UK leaves the EU and if barriers to trade are erected, both the UK and Irish economies will be adversely affected. It also does not take a rocket scientist to figure out that the agri-food sector is most vulnerable, and that lower-skilled workers and the rural economy are most exposed.

Nothing that we are seeing emanating from the UK at the moment would fill one with confidence that a ‘hard’ Brexit can be avoided.

Boris Johnson’s Valentine’s Day speech was devoid of any detail, but another referendum is being ruled out, at least as far as he is concerned.

He is seeking to placate the increasingly disillusioned ‘remainers’, but nothing they heard from Boris would have given any reasons for cheer.

He warned that the UK would be mad to end up with a Brexit settlement that would not allow the UK enjoy the economic freedoms of leaving the EU.

This suggests he wants a ‘hard’ Brexit. There are no surprises there.

If these chill ‘hard’ Brexit winds continue to blow and gather strength, UK companies will have to up the ante in relation to an EU presence in the post-Brexit era.

From Ireland’s perspective, the physical ability to prove attractive to large numbers of UK workers who might want to locate here is looking increasingly fragile.

Access to education would be a nightmare, but access to housing would be an even worse nightmare, as was evidenced by a considerable body of data this week.

The latest Daft.ie rent market report shows that asking prices for rented properties increased by 10.4% in the year to the final quarter of 2017, and rents are now estimated to be 19% higher than their peak back in the heady days of 2008.

The latest data from the Central Statistics Office show that private rents increased by 6.1% in the year to December and have increased by 59.5% since the end of 2010.

On the house price front, the latest residential property price data from the CSO show that in the year to December, average house prices nationwide increased by 12.3%; by 13.3% outside of Dublin; and by 11.6% in Dublin.

Average house prices nationwide have increased by 72.1% since their low point in March 2013; prices outside of Dublin have increased by 64.8% since their low point in May 2013; and Dublin prices have increased by 87.3% since their low point in February 2012.

Nationwide prices are now just 22.9% lower than their peak in 2007; outside of Dublin, prices are 28.4% lower; and Dublin prices are 24.4% lower.

All of these housing-related data give one clear message - Ireland’s shortage of housing in the face of strong and growing demand is continuing to worsen.

The problem is that even in theunlikely event of a flash of inspiration to increase supply, the  time lag involved would be quite long and it looks very clear that the situation is probably going to get considerably worse before it gets better, or even before it stabilises.