‘Loss of momentum’: Target of 41,000 homes built this year looks set to be missed by 6,000

THE CENTRAL BANK has warned that the “loss of momentum” with homes being built was “greater than expected” at the end of last year and will continue into this year.

Some 30,330 new dwellings were completed last year, down from 32,695 the year previous in 2023.

The government has issued revised housing completion targets of 41,000 this year in its programme for government, up from the 34,600 figure contained in the Housing for All plan.

However in its first quarterly bulletin for 2025, the Central Bank estimates that housing completions for this year will be 35,000.

While this is an increase on the 30,330 new dwellings completed last year, it is 6,000 less than the revised government targets.

The targets for 2026 and 2027 are also set to be missed. There are revised targets in the programme for government of 43,000 and 48,000 for next year and 2027 respectively.

However, the Central Bank said housing completion forecasts for 2026 and 2027 are 40,000 and 44,000 respectively.

The Central Bank pointed to several factors, including low productivity in the construction sector, delays in utility connection, delays in the planning system and a shortage of zoned and serviced land in high-demand areas.

And while housing commencements rose by almost 69,000 units in 2024, there is uncertainty over the proportion of these commencements that are likely to result in completed dwellings in the period between now and 2027. 

The Central Bank has said that in order to “unlock” housing, there needs to be a “more investable and sustainable construction sector, where housing that is affordable for renters and buyers alike is delivered at viable cost”.

It said that residential development could be turned into a sector that is more attractive to investment by incentivising more productivity, scale and modern methods of construction in the sector, and incentivising the “most active use of available land for residential purposes”.

It also called for “maximising of the available land for residential construction through adequate public infrastructure delivery and a more effective planning regime, especially in urban areas”.

Tariff threat

Meanwhile, the Central Bank has warned that the threat of tariffs “presents a very different landscape for the Irish economy” than has existed in recent years.

In a media briefing, Robert Kelly, the Central Bank’s Director of Economics and Statistics, noted that Donald Trump’s tariff threats are subject to change and that this creates a “real challenge” and adds to uncertainty.

This uncertainty in Ireland was described as being higher than that caused by the Russian invasion of Ukraine, though not as high that brought on by Brexit.

Kelly said global economies are impacted by this uncertainty and that Irish and EU leaders need to engage and co-ordinate their response.

He added that the impacts of any tariffs on Ireland would “depend on detail” and how the EU responds to tariffs.

Export growth of 5% has been revised down “moderately” from 5.1% in the Central Bank’s first quarterly bulletin, and this growth is expected to be supported by a “continued expansion in pharmaceutical and ICT services exports”.

This “momentum” in the pharmaceutical sector itself is due largely to the exports of weight-loss drugs to the US.

However, the Central Bank cautioned that this forecast is “sensitive to any further deterioration in global trade, including from potential new tariffs”.

During Taoiseach Micheál Martin’s visit to the White House last week, Donald Trump said Ireland is “lucky” Trump wasn’t president when US pharmaceutical companies moved to Ireland as he would have placed 200% tariffs on them.

Trump said “Ireland has got the entire US pharmaceutical industry in its grip” and pointed to this as an example of Ireland taking “advantage” of the US.

Trump also threatened to impose 200% tariffs on wine, champagne and other alcoholic products from EU Union countries.

He threatened the move in retaliation against an EU decision to impose 50% levies on US-produced whiskey.

Kelly remarked that a “significant rise in policy uncertainty in recent months is the most prominent feature of the current economic outlook”. 

He said this rise in uncertainty “centres on the shift in geoeconomic relationships brought on by the signalled policy stances of the new US Administration”, as well as the responses from other major economies. 

“Widespread announcements and implementation of tariffs and non-tariff barriers, and the need for Europe to evolve geopolitical priorities, present a very different landscape for the Irish economy than we have had in recent years,” said Kelly.

In its bulletin, the Central Bank warned that Ireland’s “continued concentrated exposures to foreign multinationals, particularly pharmaceuticals, introduces key sector risk to the forecast”.

“Should further evidence of trade tensions or a widespread increase in tariffs begin to emerge, then the outlook for the Irish economy would be weaker than in the current baseline forecast,” said the Central Bank bulletin.

Domestic economy performing well

However, while the outlook is challenged by global events, the Central Bank said that the domestic economy “has for the most part continued to perform well”.

This is most evident in the labour market, with the unemployment rate remaining at historical lows.

But “elevated economic uncertainty in recent months” has prompted a the Central Bank to issue a “modest downward revision to the outlook”.

Modified Domestic Demand is now forecast to grow by 2.7% in 2025 and 2.4% on average in 2026 and 2027, a reduction of 0.5% from the previous Central Bank bulletin.

Modified Domestic Demand (MDD) is a metric commonly used in Ireland as it excludes the economic activities of multinationals.

The Central Bank added that any “potential impact of a loss of excess corporation tax receipts” highlights the need to “broaden out the tax base”.

It also noted that while public finances have benefited from “surging corporation tax receipts in recent years”, it is “disconnected from domestic economic activity and drawn from a very concentrated and narrow base”.

Meanwhile, households’ real incomes are forecast to continue to rise, supported by further growth in employment and with inflation expected to remain below 2% on average over the forecast horizon to 2027.

Headline inflation is projected to rise to 2.2% in 2025 before declining to 2.1% in 2026, and further easing to 1.4% in 2027.