Are property prices getting in the way of Ireland’s business with the US?

A week is a long time in politics… particularly this week. Within days of Leo Varadkar handing over the ceremonial bowl of Shamrock to the US president, his successor will have to address concerns raised by the American Chambers of Commerce about the negative impact of Ireland’s ongoing housing crisis on Irish-America business relations.

The most recent data from the Central Statistics Office (CSO) confirms that property prices in Ireland have accelerated for the fifth consecutive month, with a national increase of 5.4 percent in the year to January. Frankly, this figure has likely increased in the two months since the data was collected through stamp duty returns. This escalation, particularly pronounced outside of Dublin, poses significant challenges not just for domestic homebuyers but also for international businesses and their employees. Dublin itself has seen a 4.5 percent increase, with prices outside the capital experiencing even higher growth rates. Such figures are indicative of a market that, despite previous slowdowns due to interest rate hikes, is regaining momentum at an accelerated pace. Price stabilisation lies in greater increased supply. Right now, homebuilding is not keeping pace with demand and this is something our team within Lotus Investment Group are working with clients across the country to address.

For US companies, Ireland represents a critical hub due to its pro-enterprise economy, stable political environment, and strategic location as a gateway to the European market. With hundreds of US companies based here, employing a substantial portion of the Irish workforce, the bilateral relationship is undeniably significant. However, the escalating cost of living, driven predominantly by soaring property prices, is becoming a formidable obstacle. A survey by the American Chambers of Commerce, as reported by EuroNews and RTE, demonstrates the severity of the situation: 98 percent of US firms find it ‘difficult’ to secure housing for their staff, with 73 percent describing the challenge as very or “extremely difficult”. This housing crisis not only affects the well-being and retention of current employees but also poses a significant barrier to attracting new talent.

So why should this matter to homebuilders? On the one hand, Ireland’s appeal as a location for US investment is tarnished by the housing affordability crisis, potentially jeopardising future investment and expansion plans (and future housing demand). On the other, the economic symbiosis that benefits both nations might be at risk if solutions are not found promptly. It is only fair to acknowledge the efforts being made to address these challenges. The government’s affordability schemes and the anticipated cycle of rate reductions by the European Central Bank (ECB) are steps in the right direction. Also, the construction sector’s recent achievements, including a 15-year peak in new home completions, are commendable. However, these milestones, while significant, should not overshadow the persistent supply-demand mismatch in the housing market.

As a non-bank funder, we are committed to supporting the construction of new homes, recognising the part we have to play in mitigating the housing crisis. By providing alternative financing options to homebuilders, we aim to expedite the delivery of new units to the market. However, a collaborative effort involving government policy, private investment, and innovation in construction technology is crucial to achieving long-term stability. Contact us to discuss financing for your next development project: https://www.lotusig.com/

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group