Irish banks will struggle to solve housing crisis, says ESRI

An additional €50bn in new mortgage lending will be needed by 2024, creating a "significant funding gap"...

Irish banks will struggle to solve housing crisis, says ESRI

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Irish banks could have problems lending enough cash to solve the housing crisis, according to the Economic and Social Research Institute (ESRI).

The think-tank has forecast that there is "likely" to be an increase in demand for housing from the current level of 23,000 units per annum to just over 30,000 per annum in 2024. 

This rise in demand of a third in just eight years could mean lenders would struggle to give out enough homeloans using deposits. An additional €50bn in new mortgage lending will be needed.

The ESRI stated of the challenges it poses for the domestic banking sector:

"It is likely to result in a significant increase in the difference between credit levels and domestic deposits, what is commonly referred to as the 'funding gap'.

It is suggesting the Central Bank could make regular changes to mortgage rules to work with the shifting market. Foreign banks may be required to re-enter the Irish market to handle the fresh mortgage lending. The ESRI expects house prices to rise by 7% annually over the next two years, and 5% per year thereafter in the medium term.

In its latest report, it also warned that the introduction of a common corporate tax base in Europe – known as CCTB – would reduce Ireland's economic output by 1.5%. Investment flows would be seriously damaged, tax revenues would drop and there would be a swift rise in unemployment, the ESRI said. 

France, meanwhile, would be the biggest beneficiary, enjoying a 6% boost to its corporate tax take.