Mixed Signals, Policy Shifts, and Global Insights in Irish Property – Weekly client briefing

Recent reporting in the Business Post challenges the government’s claims of a “record breaking” building boom in Ireland. Despite official figures showing 32,695 new homes built last year, significantly ahead of pre-pandemic levels, CSO data suggests actual house-building activity may be lower than reported. The article notes that while construction employment is approaching Celtic Tiger levels at 198,000 workers, the CSO’s index tracking residential construction production is actually 24 percent behind 2019 levels. This discrepancy may be partly due to developers filing commencement notices ahead of deadline to avail of incentives, rather than reflecting actual building starts. Interestingly, the average size of new-build homes has decreased by 14 percent since 2019.

Pre-Budget Submissions

Martin Shanahan of the IDA, writing in The Irish Times, warns that slow infrastructure development and skills shortages could seriously hobble Ireland’s ability to attract foreign direct investment. The IDA, which is a member of the National Competitiveness and Productivity Council, points to the frustrations of multinational companies with the slow response in addressing infrastructure shortfalls in areas like housing, energy, water, and transport. Shanahan also notes that while Ireland continues to attract investment, the results have plateaued, and maintaining the current level of FDI would be a positive outcome given global and domestic challenges.

Labour issues are also impacting the sector, with RTE reporting that plumbers, fitters, and welders represented by Unite are planning one-day work stoppages at large construction sites. The union is seeking restoration of travel time pay cut during the 2008 financial crisis, which would result in a 12.7 percent pay increase. While residential construction sites are not to be targeted due to the housing crisis, other large sites will be affected. The Mechanical Engineering & Building Services Contractors’ Association (MEBSCA) expressed disappointment with the action, stating that an agreement yielding pay increases of 12.7 percent was reached just eight months ago.

On the policy front, Tabitha Monahan of the Irish Independent reports that the government has decided to defer the introduction of the Residential Zoned Land Tax for a year and plans to draft a new scheme excluding farmers. This decision by Finance Minister Jack Chambers will be seen as an election sweetener for farmers but could also benefit land speculators. The tax, which would have seen land zoned for residential development taxed at 3 percent of its market value, was intended to unlock more sites for housing construction and prevent speculation.

Meanwhile, the Institute of Professional Auctioneers & Valuers, as reported by RTE, is calling for tax incentives to encourage private landlords and builders into the market. Their proposals include a modified version of the previous ‘Section 23’ tax relief, allowing investors to offset taxable rental income for buying new properties for rental purposes. They also suggest introducing a common tax rate of 30 percent for all landlords and allowing market rents for new tenancies in Rent Pressure Zones.

Internationally, The Negotiator reports on a comprehensive study by Dr. Konstantin Kholodilin for the Institute of Economic Affairs, finding that rent control policies often lead to negative outcomes. The study, which examined 196 studies over 60 years across almost 100 countries, shows that rent controls can result in reduced maintenance spending, poorer quality housing, conversion to owner-occupation, fewer new rental properties being built, and reduced residential mobility. This aligns with recent reports from Argentina, where rental supply jumped by nearly 200 percent following the repeal of rent control laws.

As a non-bank lender, we remain committed to supporting our home-builder clients across Ireland to deliver, through providing flexible financing solutions that adapt to these market dynamics while managing risk appropriately.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group