COMMISSION STAFF WORKING DOCUMENT In-depth review for Ireland in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: European Semester, Ireland, economic policy, economic recovery, energy policy, housing policy, indebtedness, macroeconomics, multilateral surveillance, property market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  SWD(2022) 634 final  COMMISSION STAFF WORKING DOCUMENT In-depth review for Ireland           in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances                 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package {COM(2022) 600 final} - {SWD(2022) 628 final} - {SWD(2022) 629 final} - {SWD(2022) 630 final} - {SWD(2022) 631 final} - {SWD(2022) 632 final} - {SWD(2022) 633 final} - {SWD(2022) 635 final} - {SWD(2022) 636 final} - {SWD(2022) 637 final} - {SWD(2022) 638 final} - {SWD(2022) 639 final}  
 
 
On the basis of this in-depth review for Ireland undertaken under Regulation (EU) No 
1176/2011  on  the  prevention  and  correction  of  macroeconomic  imbalances,  the 
Commission has considered in its Communication  “European Semester – 2022 Spring 
Package” (COM(2022)600 final) that: 

Ireland,  identified  with  imbalances  in  2021,  is  found  to  experience  no  imbalances. 
Important progress has been made in reducing government and private indebtedness as well 
as  net  external  liabilities,  both  before  and  since  the  pandemic.  The  reductions  of  the  debt 
ratios  remain  significant,  albeit  smaller,  when  national  output  is  adjusted  for  the  effects  of 
the operations of multinational enterprises registered in Ireland. Both private and government 
indebtedness  are  expected  to  continue  falling,  with  the  external  position  strengthening 
further.  Irish  banks  continued  reducing  their  non-performing  loans  ratio.  High  house  price 
growth  continues  to  be  a  challenge  for  housing  affordability,  but  risks  to  macroeconomic 
stability  appear  contained  so  far.  While  its  direct  impact  might  be  limited  due  to  its 
comparatively  small size, the RRP has the potential to help strengthen the fundamentals  of 
the economy further. 

Important progress has been made in reducing government and private indebtedness as well 
as  net  external  liabilities,  both  before  and  since  the  pandemic.  The  reductions  of  the  debt 
ratios  remain  significant,  albeit  smaller,  when  national  output  is  adjusted  for  the  effects  of 
the operations of multinational enterprises registered in Ireland. Both private and government 
indebtedness  are  expected  to  continue  falling,  with  the  external  position  strengthening 
further.  Irish  banks  continued  reducing  their  non-performing  loans  ratio.  High  house  price 
growth  continues  to  be  a  challenge  for  housing  affordability,  but  risks  to  macroeconomic 
stability  appear  contained  so  far.  While  its  direct  impact  might  be  limited  due  to  its 
comparatively  small  size,  the  RRP  has  the  potential  to  help  strengthen the fundamentals  of 
the economy further.  

1 

 
 
 
 
 
 
 
  
 
 
CONTENTS 

1.  Introduction 

2.  Assessment of macroeconomic imbalances 

3.  Thematic chapter: Housing market 

LIST OF TABLES 

Table b.1.1:   Selected exposures 

Table 2.1: 

Selected economic and financial indicators (Part 1), Ireland 

Table 2.2: 

Selected economic and financial indicators (Part 2), Ireland 

Table 3.1: 

Selected housing indicators, Ireland 

LIST OF GRAPHS 

Graph b.1.1:   Sectoral distribution of energy use and of energy imported from Russia 

Graph 3.1: 

Housing units completions and commencements 

Graph 3.2: 

Employment in construction 

3 

4 

11 

8 

9 

10 

15 

8 

12 

14 

2 

 
 
 
 
 
 
1.  INTRODUCTION 

In  2021,  over  the  previous  annual  cycle  of  surveillance  under  the  Macroeconomic  Imbalances 
Procedure  (IDR),  the  Commission  identified  “macroeconomic  imbalances”  in  Ireland. (1)  These 
imbalances  were  related  to  high  private  and  public  debt  and  net  external  liabilities.  The  2022  Alert 
Mechanism Report concluded that a new in-depth review (IDR) should be undertaken for Ireland with a 
view to assess the persistence or unwinding of imbalances. (2) 

Ireland’s  real  GDP  continued  to  expand  at  brisk  pace  in  2021,  bolstered  by  multinational  firms’ 
performance,  and  the  economy  enjoys  a  positive  outlook  despite  the  current  geopolitical 
situation. (3) Ireland’s real GDP grew by an exceptional 13.5% in 2021, driven by the strong performance 
of multinational corporations headquartered there. Domestic sectors, which tended to be more affected by 
lockdown  measures  in  2021,  started  recovering  and  also  contributed  to  growth  (modified  domestic 
demand  increased  by  6.5% (4)).  Despite  the  Russian  invasion  to  Ukraine,  which  is  set  to  negatively 
impact  growth  in  Europe  through  higher  prices  and  shortages  of  energy  and  other  inputs,  the  Irish 
economy is projected to keep growing in 2022 and 2023, by 5.4% and 4.4%, respectively. As result of the 
very strong growth over the last years, including during the pandemic, the nominal GDP level in 2023 is 
forecast  to  be  more  than  30%  above  its  2019  level.  After  a  long  period  of  excess  saving  during  the 
pandemic,  household  spending  will  gradually  normalise  and  support  private  consumption.    Investment 
spending  is  also  expected  to  pick  up  in  response  to  the  need  to  accelerate  the  energy  transition  and 
address  the  persistent  undersupply  of  housing.  The  unemployment  rate  has  declined  rapidly  with  no 
evident scarring on the labour market and in early 2022 reached pre-crisis levels again.  It is forecast to 
decrease  further  to  4.6%  in  2022,  but  increase  to  5.0%  in  2023. The  arrival  of  migrants  from  Ukraine, 
who  hold  a  right  to  work,  will  require  additional  public  spending  but  might  help  to  alleviate  labour 
shortages  in  certain  sectors.  HICP  inflation,  driven  by  high  energy  prices  and  persistent  supply 
bottlenecks, is projected to reach 6.1% in 2022 before declining to 3.1% in 2023.  

This in-depth review presents the main findings of the assessment of imbalances. The assessment is 
backed by a thematic section on the housing market. Spillovers and systemic cross-border implications of 
imbalances  are  also  taken  into  account.  In  addition,  assessments  of  structural  issues  made  in  previous 
IDRs and in the context of fiscal assessments are also considered if relevant. The MIP assessment matrix 
is published in the 2022 Country Report for Ireland. (5) 

(1)  European Commission (2021), European Semester Spring Package 2021, COM(2021) 500 final. 
(2)  European Commission (2021), Alert Mechanism Report 2022, COM (2021) 741 final. 
(3)  Forecast data are from European Commission (2022), European Economic Forecast: Spring 2022, Institutional Paper 172. 
(4)  Modified (final) domestic demand, a proxy for the domestic economy, is the sum of personal and government consumption and 

investment, excluding investment in imported intellectual property and aircrafts for leasing.  

(5)  European Commission (2022), Country Report Ireland 2022, SWD(2022)615 final. 

3 

 
 
                                                           
2.  ASSESSMENT OF MACROECONOMIC IMBALANCES 

Assessment of gravity, evolution and prospects of macroeconomic imbalances 

Private debt relative to GDP in Ireland has substantially declined and is likely to remain on a non-
increasing  path,  supported  in  part  by  strong  GDP  growth.  In  2021,  it  decreased  by  some  10 
percentage points to 179.1% of GDP, in its sixth consecutive year of reduction. Private debt now stands 
far  below  its  peak  of  304.0%  of  GDP,  which  it  had  reached  in  2015.  The  robust  economic  growth 
expected in the coming years, combined with rising wages and a healthy financial situation of corporates, 
is  expected  to  keep  the  private  debt-to-GDP  on  a  declining  path.  Furthermore,  policies  to  ease  housing 
supply constraints and improve affordability are likely to gradually ease the trajectory of household debt 
accumulation.  

Both very strong GDP growth and continuous deleveraging from households and corporates before 
and during the pandemic contributed to the favourable private debt dynamics. Household debt has 
fallen  to  30.8%  of  GDP  (around  60%  of  GNI*)  in  2021,  well  below  the  fundamentals-based  and 
prudential  benchmarks.  Corporate  debt  has  also  decreased,  to  148.2%  of  GDP  in  2021.  It  remains 
relatively  high  when  compared  to  the  EU  average,  which  is,  however,  partly  owed  to  the  debt  of 
multinational corporations. Debt of domestically controlled firms has slightly decreased to 63.1% of GDP 
in  2020  (or  113%  of  GNI* (6)),  placing  it  below  the  prudential  benchmark  but  still  above  the 
fundamentals-based benchmark. The non-performing loan (NPL) ratio remains historically low for Irish 
retail banks (3.7% in September 2021), although the NPL  ratio on corporate  loans increased during the 
pandemic, from 4% at end-2019 to 7.3% in September 2021 (7).  

Ireland’s general government debt ratio remained below 60% of GDP in spite of pandemic-related 
spending  pressures.  Before  the  COVID-19  crisis  the  government  debt  ratio  had  followed  a  declining 
trend for 8 years thanks to strong economic growth and prudent expenditure patterns. That consolidation 
effort brought public debt to  a 10-year low of 57.2% of GDP and the  general  government  balance to a 
surplus of 0.5% of GDP in 2019. While in 2020 and 2021 the Irish Government increased spending by 
18.0% and 3.2% to shore up the economy, the debt-to-GDP ratio remained below the 60% threshold and 
is forecast to fall back to 50.3% of GDP in 2022. Going forward, in the short-to-medium term, the debt 
ratio is projected to decline further on the back of strong  economic  growth.  However,  when  measuring 
government  debt  as  a  proportion  of  GNI*  the  ratio  would  be  higher,  in  the  neighbourhood  of  100%  in 
2021.  

Ireland faces low fiscal sustainability challenges in the medium-term and medium ones in the long-
term (8).  The  Commission’s  fiscal  sustainability  assessment  shows  that  Ireland  faces  medium  fiscal 
sustainability  risks  over  the  long  run.  Financial  markets’  perceptions  of  sovereign  risks  remain 
favourable,  as  confirmed  by  low  sovereign  bond  and  CDS  spreads  and  the  ‘AA’  rating  (or  equivalent 
assessment)  that  the  three  major  rating  agencies  assigned  to  Irish  sovereign  debt.  In  addition,  Irish 
government bonds enjoy a favourable average debt maturity of over 11 years and stable financing sources 
with  a  large  and  diversified  investor  base.  In  2021,  a  significant  share  of  debt  was  held  within  the 
Eurosystem. 

Irish  banks  continued  reducing  their  NPL  ratio  over  the  past  years,  a  process  only  temporarily 
slowed down by the pandemic. The NPL ratio continued to fall in 2021 and reached 2.4% at year-end, 
down  from  its  peak  value  of  23%  in  2013.  While  NPLs  have  been  trending  down  overall,  foreign 

(6)  Modified Gross National Income (GNI*) reflects the income standards of Irish residents more accurately than GDP. It differs 
from actual GNI in that it excludes, for example, the depreciation of foreign-owned, but Irish resident, capital assets (notably 
intellectual property and assets associated with aircraft for leasing) and the undistributed profits of firms that have re-domiciled 
to Ireland. 

(7)  Data on NPLs was taken from the European Central Bank’s Statistical Data Warehouse. 
(8)  See  European  Commission  Country  Report  on  Ireland  for  the  latest  results  and  the  ‘Fiscal  Sustainability  Report  2021’, 

Institutional Paper 171, 25 April 2022 for methodological details. 

4 

 
                                                           
 
2. Assessment of macroeconomic imbalances 

subsidiaries  operating  in  Ireland  lower  the  aggregate  NPL  ratio,  which  is  somewhat  higher  (3.7%)  for 
domestic  banks.  Domestic  banks  reported  higher  NPL  ratios  for  loans  to  non-financial  corporations 
(7.3%)  than  for  loans  to  households  (4.9%).  Arrears,  mainly  linked  to  mortgages,  kept  declining 
significantly and, even though still sizeable, at end-2021 represented only 43% of their total value at end-
2018. This is mainly due to banks’ successful action over the past years to decrease their NPLs through 
the  restructuring,  sale  and  securitisation  of  NPL  portfolios.  Notwithstanding  the  positive  developments 
for NPLs, asset quality remains a concern as a somewhat larger share of loans is being classified as risky 
(Stage 2), increasing from 8.4% of loans at end-2019 to 15% at end-2021. Corporate insolvencies remain 
at historically  low  levels but  are likely to increase  as  support  measures implemented in  response to the 
pandemic are withdrawn. 

The  modified  current  account  balance  was  very  positive  during  the  pandemic  years.  The  current 
account swung to a large surplus of 13.9% in 2021 from  -2.7% in 2020, driven by booming exports of 
multinational  corporations.  Meanwhile  the  modified  current  account  balance (9),  which  better  reflects 
domestic economic activity, has increased to 6.4% of  GDP (11.5% of GNI*) in 2020 and is expected to 
continue to remain stable and positive. This suggests that the Irish economy and its domestic companies 
have  maintained external competitiveness. The sanctions imposed by the EU and its partners on Russia 
and  Belarus  seem  to  have  limited  side  effects  for  the  Irish  economy,  although  increasing  energy  prices 
could affect the external position (see box 2.1). 

The  net  international  investment  position  has  significantly  improved.  Ireland’s  net  international 
investment position (NIIP) increased from -174% of GDP in 2020 to -138.9% at the end of 2021, and no 
longer exceeds the prudential benchmark. The country’s NIIP is heavily influenced by the activities and 
balance sheets of multinational companies and the country’s position as a major financial centre. Most of 
the constituent entities have limited links to Ireland’s domestic economy, which in turn reduces domestic 
exposure  and  vulnerabilities.  The  underlying,  domestically  relevant,  NIIP  remains  hard  to  gauge  but  is 
much smaller, between –25% and –39% of GDP (i.e. –45% and –70% of GNI*) in 2020, according to the 
Commission estimates, and might not exceed the MIP threshold of  -35% of GDP. Risks associated with 
the general government’s external liabilities can be considered limited, further mitigated by the fact that 
around  one-fifth  consist  of  loans  disbursed  by  official  creditors  during  the  economic  adjustment 
programme. These loans have long maturity and low interest rates, thus posing little risk in the short and 
medium  term.  Going  forward,  the  significantly  positive  current  account  balance  is  likely  to  continue 
further reducing Ireland’s NIIP.  

House prices kept increasing in 2021. Growth in real house prices is estimated to have accelerated from 
close to zero in 2019 and 2020 to 4.3% in 2021. The main reason for rising prices continues to be supply 
falling  short  of  demand.  The  number  of  annual  dwelling  completions  sharply  increased  until  2019,  but 
stagnated  in  2020  and  2021  due  to  the  pandemic-induced  lockdown  of  the  construction  sector.  At  the 
moment,  average  national  house  prices  do  not  appear  to be  overvalued  according  to  standard  valuation 
metrics,  although  housing  affordability  remains  a  concern.  The  number  of  years  of  gross  disposable 
income required by an average household to buy a 100 square meter dwelling amounted to 16.3 in 2021, 
amongst  the  highest  in  the  EU.  Swift  house  price  growth  is  expected  to  continue  in  2022.  However, 
decreasing household indebtedness levels and effective macro prudential policy settings suggest risks of 
negative spillovers to other sectors remain limited. 

Assessment of MIP relevant policies  

During  the  pandemic  the  government  took  resolute  measures  to  backstop  the  economy,  protect 
household  incomes  and  prevent  a  rise  in  non-performing  loans.  Two  employment  support  schemes 
were introduced for workers – the Pandemic Unemployment Payment scheme and the Employment Wage 
Subsidy Scheme (EWSS). These schemes prevented unemployment from turning into a structural feature, 
and played a key role in supporting wages, consumption and companies’ solvency during the pandemic. 
In  2021,  the  EWSS  provided  over  EUR  4.6  billion  of  wage-support  to  companies,  likely  playing  a 
significant  role  in  keeping  insolvencies,  and  hence  NPLs,  at  historically  low  rates  (estimated  at  14 

(9)  The modified current balance (CA*), developed by the Irish Central Statistics Office (CSO), is adjusted for the main following 
globalisation-related distortions: intellectual property imports, imports of aircraft related to leasing, the depreciation of capital 
assets  owned  by  Irish  resident  foreign-owned  firms  and  the  repatriated  global  income  of  companies  that  moved  their 
headquarters to Ireland. 

5 

                                                           
2. Assessment of macroeconomic imbalances 

insolvencies per 10,000 businesses). Other pandemic support measures, such as loan moratoria and credit 
guarantees have further mitigated the negative effects of the pandemic on banks’ asset quality. Finally, in 
2021 the Central Bank of Ireland started a review of the mortgage measures frameworks, which had been 
introduced in 2015. 

Going  forward,  Ireland  plans  to  constrain  the  rate  of  public  debt  accumulation.  In  July  2021,  the 
Irish government set out a rule that caps the increase in overall core spending to 5% each year from 2023 
onwards,  which  is  a  positive  step  for  strengthening  the  medium-term  fiscal  planning.  The  authorities 
estimate this rate to be in line with the economy’s trend nominal growth rate. However, the commitment 
is not legally binding. Moreover, estimates of potential growth are surrounded by a considerable degree of 
uncertainty in the case of Ireland, given its dual economy and historically large fluctuations around trend 
growth.  Finally,  future  increases  in  capital  expenditure  related  to  increasing  the  stock  of  housing  and 
reducing greenhouse gas emissions could strain this commitment. 

The government has actively intervened to address housing supply constraints. Measures introduced 
have had an overall positive impact but need continued monitoring and refinements, some of which have 
been  announced  under  the  new  “Housing  for  All”  plan.  Measures  included  reforming  of  the  land 
development and planning process, as well as large investments in social housing, which are expected  to 
increase  the  housing  supply.  However, labour constraints  and rising costs of  materials,  might strain the 
affordability and timing of new projects.  

The  government  has  also  implemented  a  variety  of  support  schemes  to  increase  housing 
affordability  for  first-time  buyers  (FTBs).  These  include  the  Help-to-Buy  scheme,  the  shared  equity 
loan scheme and the local authority home loan scheme. A close and regular monitoring is recommended 
so they can be quickly adjusted if any market distortions arise. Effectively targeting these schemes — to 
lower-income FTBs only — remains crucial to reduce the risks of creating inflationary pressures in the 
housing market.  

The Recovery and Resilience Plan has the potential to help further strengthening fundamentals of 
the Irish economy (10). While the direct impact of the plan on vulnerabilities might be limited due to its 
comparatively  limited  size  (0.3%  of  2019  GDP),  the  plan  is  expected  to  improve  productivity, 
competitiveness,  employment  and  resilience.  This  may  indirectly  help  lessen  riskiness  related  to  the 
private debt and external debt. The plan also includes healthcare reforms and eHealth investments, which 
have the potential to help achieve higher productivity and cost-efficiency in the healthcare sector, thereby 
supporting fiscal sustainability. 

Conclusion  

Ireland has  made substantial and steady progress in reducing its vulnerabilities related to public, 
private  and external indebtedness. An extraordinarily  marked GDP increase  over the past decade has 
allowed  strong  reduction  of  debt-to-GDP  ratios.  Reductions  were  also  significant,  but  milder,  when 
measured  in  denominators  that  expurgate  the  impacts  of  some  operations  of  multinational  corporations 
with limited links with Ireland's domestic economy. Private debt, particularly household debt, continued 
its  downward  path  throughout  the  pandemic.  The  corporate  sector  weathered  the  pandemic  well,  and 
continued  to  deleverage.  Multinational  corporations  headquartered  in  Ireland  performed  exceptionally 
well and the domestic companies showed healthy signs of recovery, particularly when the COVID-related 
restrictions were lifted. Overall, private debt is 100 percentage points of GDP lower than a decade ago. 
Government  debt,  despite  some  additional  borrowing  that  was  necessary  to  support  the  economy,  has 
remained below 60% of GDP. The negative  NIIP has improved and the Irish banks continued reducing 
their  non-performing  loans  ratio.  However,  the  pandemic  impeded  housing  supply  expansion,  fuelling 
house  price  growth.  Housing  affordability  hence  remains  a  challenge.  Exposures  to  energy  prices  are  a 
pressing concern, yet are unlikely to significantly affect macroeconomic vulnerabilities over the medium 
term (see box 2.1). 

(10)  For  more  detail,  see  Commission  Staff  Working  Document,  “Analysis  of  the  recovery  and  resilience  plan  of  Ireland,”  

SWD(2021) 205 final, 16.7.2021 

6 

                                                           
2. Assessment of macroeconomic imbalances 

Going  forward,  the  positive  economic  outlook  is  expected  to  contribute  to  a  further  reduction  of 
public,  private  and  external  indebtedness,  but  marked  house  prices  growth  may  be  an  issue  for 
some time. The public debt ratio is forecast to remain below 60% of GDP over the forecast horizon. On 
current  trends,  both  household  and  corporate  indebtedness  are  expected  to  continue  falling,  while 
continued  high  current  account  surpluses  are  forecast  to  further  improve  the  negative  NIIP.  Housing 
supply is still  falling short of demand and thereby  house price  growth is expected to continue being an 
issue, at least in the short-term before additional supply becomes available. 

In  2021,  policy  efforts  continued  to  focus  on  short-term  measures  to  address  the  impact  of  the 
pandemic.  This  shored  up  employment  and  household  incomes,  alongside  a  range  of  policies  and 
investments  to  support  housing  supply  from  the  public  and  private  sector.  That  helped  private  sector 
deleveraging,  especially  by  households,  while  government  debt  fell  too.  The  government  has  actively 
intervened to address housing supply constraints. In particular, the ‘housing for all’ plan aims to increase 
the number of newly constructed homes by 33 000 each year to 2030. This could considerably limit house 
price growth and improve affordability. An expected arrival of Ukrainian refugees increases the need to 
proceed  fast  with  housing  supply  expansion.  The  RRP  also  includes  healthcare  reforms  and  eHealth 
investments,  which  have  the  potential  to  help  achieve  higher  productivity  and  cost-efficiency  in  the 
healthcare sector, thereby supporting fiscal sustainability. 

Based  on  the  findings  in  this  in-depth  review,  the  Communication  “European  Semester  –  2022 
Spring  Package” (11)  sets  out  the  Commission’s  assessment  as  to  the  existence  of  imbalances  or 
excessive imbalances in Ireland, in line with Regulation 1176/2011. 

(11)  European Commission (2022), European Semester Spring Package 2022, COM(2022)600 final. 

7 

 
 
                                                           
2. Assessment of macroeconomic imbalances 

Box 2.1: 

Exposures to the commodity price surge, and to Russia 

This  box  summarises  risks  and  exposures  regarding  the  commodity  price  surge,  and  the 
importance of direct links with the Russian economy. The surge of commodity prices since 2021 
had been aggravated by the Russian military aggression against Ukraine. This box reviews  the  risks 
for  the  macroeconomic  vulnerabilities  in  Ireland.  Available  data  suggests  that  exposures  to  energy 
prices  are  a  pressing  concern,  yet  are  unlikely  to  significantly  affect  macroeconomic  vulnerabilities 
over the medium term. Although the sanctions imposed by the EU and its partners on Russia and 
Belarus will have side effects for the Irish economy, they seem very limited and are likely to affect 
Ireland rather via its impact on other Member States than directly. 

 Graph b.1.1:      Sectoral distribution of energy use and of energy imported from Russia 

Notes: The left panel displays the distribution of primary energy usage in Ireland according to Eurostat energy balances. The horizontal axis displays the 
relative importance of energy-consuming sectors. The vertical axis displays the importance of energy importance from Russia in satisfying that need. Note 
that this dependence on Russia differs according to sector’s use of natural gas vs oil and coal. For comparison, the right hand panels displays the same 
concept for the EU aggregate. Russian imports include oil and petroleum products,natural gas and solid fossil fuels. 
Sources: Eurostat and European Commission services calculations 
The  Irish  distribution  of  energy  usage  by  sector  is  comparable  to  the  EU  average,  but  its 
exposure to the energy price surge seems quite limited. Graph b.1.1 shows that imports from 
Russia play a very limited role for energy provision, thus the crisis is felt mainly through its impact on 
prices  rather  than  through  potential  supply  line  disruption.  Energy  is  primarily  used  for  electricity 
production and transport, whereas industry uses comparatively less energy than in the rest of the EU. 
Overall, the increased reliance on renewables and on UK imports means that the overall economy is 
likely to be less affected by a direct commodity price surge than other Member States. Moreover, the 
Irish  economy  consumes  relatively  little  imported  natural  gas,  due  to  the  increased  indigenous  gas 
production in the Corrib field (see Table b.1.1), and so is less exposed to natural gas price increases 
than the rest of the EU. 

Table b.1.1:  

Selected exposures 

Notes: data source Eurostat for commodity exposures, European Commission Figaro for value-added exposures, BIS for consolidated banking exposures, 
European Commission FinFlows for other financial exposures. Energy gross inland consumption excludes net imports of electricity and derived heat. 
In  contrast,  Ireland  has  strong  financial  links  to  Russian  entities,  most  notably  via 
international  financial  vehicles.  Table  1  shows  that  portfolio  and  other  investment  assets  held  in 
and  towards  Russia  as  %  of  GDP  are  considerably  above  the  EU  averages.  About  half  of  this 
exposure  relates  to  stocks  and  bonds  held  by  Irish  mutual  funds,  which  cater  mostly  to  foreign 
investors.  The  other  half  seems  concentrated  in  Special  Purpose  Entities  including  the  33  Russian 
sponsored  ones. (1)  Despite  these  large  links  stemming  from  Ireland  as  an  intermediary,  the  core 
domestic economy seems little exposed to Russian financial asset risks.  

(1)  Central Bank of Ireland, Statistical Release “ Direct Financial Links to Russia by Economic Sector”, 04 March 2022. 

8 

Trade & financial exposuresunitIEEUEnergy mixunitIEEUDomestic value added embodied in exports to Russia% of GDP0.9%0.4%Solids fossil fuels (incl. peat)% of Gross inland consumption 20207.6%10.8%Non-energy Russian import content in final demand% of GDP0.3%0.4%Oil and petroleum products% of Gross inland consumption 202045.3%32.7%Russian tourist nights spent% of total 20190.4%2.7%Natural gas% of Gross inland consumption 202033.2%24.4%FDI assets held in Russia% of 2020 GDP0.5%2.5%Renewables and waste% of Gross inland consumption 202013.9%19.0%Portfolio & other inv. assets held in Russia% of 2020 GDP10.2%0.9%Nuclear% of Gross inland consumption 20200.0%13.1%FDI liabilities towards Russia% of 2020 GDP0.2%1.2%Commodity exposuresunitIEEUPortfolio & other inv. liabilities towards Russia% of 2020 GDP5.7%1.1%Net petroleum imports from all countries% of GDP 20210.8%1.2%Consolidated banking exposures towards Russia% of 2021 GDP0.0%0.5%Crude oil imports from Russia '20% of oil imports0.0%25.7%Net gas imports from all countries% of GDP 20210.4%0.6%Gas imports from Russia '20% of gas imports0.0%43.6% 
 
 
 
 
 
 
 
 
Table 2.1: 

Selected economic and financial indicators (Part 1), Ireland 

2. Assessment of macroeconomic imbalances 

(e) estimate based on ECB quarterly data 
(1) Potential output is the highest level of production that an economy can reach without generating inflationary pressures. 
The methodology to compute the potential output is based on K. Havik, K. Mc Morrow, F. Orlandi, C. Planas, R. Raciborski, W. 
Roeger, A. Rossi, A. Thum-Thysen, V. Vandermeulen, The Production Function Methodology for Calculating Potential Growth 
Rates & Output Gaps, COM, European Economy, Economic Papers 535, November 2014. 
(2) Deviation of actual output from potential output as % of potential GDP. 
(3) Current accounts in line with fundamentals ("current account norms") are derived from reduced-form regressions 
capturing the main determinants of the saving-investment balance, including fundamental determinants, policy factors and 
global financial conditions. See L. Coutinho et al. (2018), "Methodologies for the assessment of current account benchmarks", 
European Economy, Discussion Paper 86/2018, for details.  
(4) This benchmark is defined as the average current account required to reach and stabilise the NIIP at -35% of GDP over the 
next 20 years. Calculations make use of Commission’s T+10 projections. 
(5) NENDI is a subset of the NIIP that abstracts from its pure equity-related components, i.e. foreign direct investment (FDI) 
equity and equity shares, and from intracompany cross-border FDI debt, and represents the NIIP excluding instruments that 
cannot be subject to default. 
(6) Fundamentals-based benchmarks are derived from regressions capturing the main determinants of credit growth and 
taking into account a given initial stock of debt. Prudential thresholds represent the debt threshold beyond which the 
probability of a banking crisis is relatively high, minimising the probability of missed crisis and that of false alerts. Methodology 
to compute the fundamentals-based and the prudential benchmarks based on Bricongne, J. C., Coutinho, L., Turrini, A., 
Zeugner, S. (2019), “Is Private Debt Excessive?”, Open Economies Review, 1- 42. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

9 

all variables y-o-y % change unless otherwise stated2003-072008-122013-17201820192020202120222023Real GDP 5.2-1.48.99.04.95.913.55.44.4Potential growth  (1)4.7-0.28.010.79.17.35.55.04.8Contribution to GDP growth:Domestic demand 5.2-2.66.2-1.129.9-14.4-12.82.62.4Inventories 0.10.00.4-1.11.00.2-0.40.00.0Net exports -0.22.02.910.7-26.521.425.82.21.8Contribution to potential GDP growth (1):Total Labour (hours) 1.3-1.81.72.12.01.51.51.41.1Capital accumulation 2.10.84.20.53.61.4-0.4-0.3-0.1Total factor productivity 1.20.82.18.13.54.34.43.93.7Output gap (2)1.1-2.81.80.3-3.5-4.82.52.82.5Unemployment rate4.813.010.15.85.05.96.24.65.0Harmonised index of consumer prices (HICP)2.80.60.20.70.9-0.52.46.13.1GDP deflator 2.0-0.92.00.74.2-1.2-0.44.84.1External positionCurrent account balance (% of GDP), balance of payments-3.0-3.40.75.2-19.9-2.713.912.512.8Trade balance (% of GDP), balance of payments11.315.020.728.53.522.340.3..Primary income balance (% of GDP)-13.3-16.9-18.7-22.2-22.4-23.9-25.3..Secondary income balance (% of GDP)-1.0-1.6-1.4-1.1-1.0-1.0-1.0..Current account explained by fundamentals (CA norm, % of GDP) (3)-0.20.51.93.03.43.54.24.95.1Required current account to stabilise NIIP above -35% of GDP over 20Y (% of GDP) (4)-0.90.0-0.8-0.7-2.0-2.6-3.0-2.0-1.5Capital account balance (% of GDP)0.20.1-3.0-16.0-9.9-4.2-0.2..Net international investment position (% of GDP)-29.8-120.3-167.3-183.6-193.5-174.0-138.9..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (5)12.6-224.9-284.0-250.3-282.8-292.9-336.0..Net FDI flows (% of GDP)6.8-4.0-9.60.0-10.514.822.18.6-0.8CompetitivenessUnit labour costs (ULC, whole economy)3.8-1.4-3.9-3.01.4-4.7-5.21.34.0Nominal compensation per employee 5.40.41.42.53.42.43.63.87.8Labour productivity (real, hours worked)1.73.25.15.32.69.27.31.02.0Real effective exchange rate (ULC)3.3-3.3-5.1-2.8-3.1....Real effective exchange rate (HICP)1.4-2.3-1.01.3-2.80.2-0.1..Export performance vs. advanced countries (% change over 5 years)15.3-2.129.074.570.450.7...Private sector debtPrivate sector debt, consolidated (% of GDP)169.9260.5276.0231.2209.4188.9179.1e..Household debt, consolidated (% of GDP)80.7107.666.043.038.735.930.8e..Household  debt, fundamental benchmark (% of GDP) (6)47.470.258.347.846.747.844.945.145.9Household  debt, prudential threshold (% of GDP) (6)67.347.561.070.371.672.974.674.274.8Non-financial corporate debt, consolidated (% of GDP)89.2152.9210.0188.2170.8153.1148.2e..Corporate debt, fundamental benchmark (% of GDP) (6)51.272.262.049.147.046.242.041.241.1Corporate debt, prudential threshold (% of GDP) (6)93.873.496.5109.5109.9110.3112.8112.1112.8Private credit flow, consolidated (% of GDP) 26.27.1-3.3-8.8-9.6-1.84.8e..Corporations, net lending (+) or net borrowing (-) (% of GDP)2.67.7-1.4-11.7-30.8-10.79.29.49.8Households, net lending (+) or net borrowing (-) (% of GDP)-8.02.61.91.71.87.15.32.82.0Net savings rate of households (% of net disposable income)1.48.14.35.85.221.4...forecast 
 
 
 
 
 
   
 
Table 2.2: 

Selected economic and financial indicators (Part 2), Ireland 

2. Assessment of macroeconomic imbalances 

(7) Unweighted average of price-to-income, price-to-rent and model valuation gaps. The model valuation gap is estimated 
in a cointegration framework using a system of five fundamental variables; total population, real housing stock, real 
disposable income per capita, real long-term interest rate and price deflator of final consumption expenditure, based on 
Philiponnet, N., Turrini, A. (2017), "Assessing House Price Developments in the EU," European Economy - Discussion Papers 2015 - 
048, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission. Price-to-income and price-to-
rent gaps are measured as the deviation to the long term average (from 1995 to the latest available year). 
(8) Price-to-income overvaluation gap measured as the deviation to the long term average (from 1995 to the latest available 
year). 
(9) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

10 

all variables y-o-y % change unless otherwise stated2003-072008-122013-17201820192020202120222023Housing marketHouse price index, nominal11.5-14.19.410.22.30.38.3..House price index, deflated8.7-13.38.68.10.3-0.24.3..Overvaluation gap (%) (7)33.74.4-16.7-6.6-9.8-13.8-10.7..Price-to-income overvaluation gap  (%) (8)25.3-4.1-12.35.13.2-3.14.1..Residential investment (% of GDP)11.93.91.82.32.32.12.1..Government debtGeneral government balance (% of GDP)1.3-15.0-2.60.10.5-5.1-1.9-0.50.4General government gross debt (% of GDP)26.384.188.663.157.258.456.050.345.5Banking sectorReturn on equity (%).-53.93.76.83.2-6.3...Common Equity Tier 1 ratio.10.916.318.518.919.2...Gross non-performing debt (% of total debt instruments and total loans and advances) (9).16.612.94.62.93.0...Gross non-performing loans (% of gross loans) (9)..14.95.53.43.42.4..Cost of borrowing for corporations (%)5.03.93.12.62.82.82.4..Cost of borrowing for households for house purchase (%)4.13.53.43.02.92.82.7..forecast 
   
 
3.  THEMATIC CHAPTER: HOUSING MARKET 

House  price  growth  has  been  increasing  in  2021.  This  follows  two  years  of  near-zero  house  price 
growth.  Real  house  prices  are  estimated  to  have  increased  from  -0.2%  in  2020  to  4.3%  in  2021.  In 
nominal terms, house prices increased by 8.3% on average according to the Irish Central Statistics Office. 
House  prices  accelerated  throughout  the  year.  Latest  data  from  January  2022  show  residential  property 
prices  were  up  by  15.3%  y-o-y,  with  price  increases  being  slightly  higher  outside  of  Dublin  (16.8%) 
compared  to  the  capital  (13.5%).  House  price  growth  is  expected  to  remain  high  in  2022  as  demand 
continues to outstrip supply.  

House  prices  in  Ireland  do  not  seem  to  be  overvalued  but  affordability  is  still  problematic. 
Commission internal benchmark metrics do not suggest that Ireland’s average national housing prices are 
overvalued. However, these calculations are based on a long-term average of house prices, which include 
a large housing bubble emerging in the mid 2000s. Independent estimates from the Irish Economic and 
Social  Research  Institute  suggest  actual  and  fundamental  house  prices  were  closely  aligned  in  Q4 
2019 (19). At the same time, the house price  to income ratio in Ireland is  high. The  number of  years of 
gross  disposable  income  required  by  an  average  household  to  buy  a  100  square  meters  dwelling  has 
lengthened  to  16.3  in  2021,  among  the  highest  in  the  EU.  This  may  impact  Ireland’s  ability  to  attract 
mobile skilled labour and result in wage pressures. 

In the rental sector, rent increases were similar to house price trends. At the start of the pandemic in 
2020,  rents  initially  fell,  as  the  lack  of  international  tourism  led  landlords  to  switch  from  short-term 
letting  to  regular  renting.  This  temporarily  increased  rental  supply,  particularly  in  the  Dublin  area. 
Furthermore, emergency legislation temporarily banned rent increases and evictions from 27 March to 1 
August  2020  and  again  from  31  December  2020  to  12  April  2021.  Following  the  re-opening  of  the 
economy in Q2 2021, rental price growth accelerated and returned to pre-pandemic levels.  

Stock available for rent has reached historic lows. This was particularly marked outside of Dublin (20), 
in part due to increased opportunities for tenants to work remotely. Outside of Dublin the average rental 
price  increase  was  higher than in the capital.  Overall, the  total number of tenancies registered has been 
decreasing, with mainly small landlords leaving the rental market. This may be partly due to rent controls 
in Rent Pressure Zones but also high sale prices. Growing interest in build-to-let by institutional investors 
has helped soften the decrease in rental stock, but still represents a small portion of the rental sector and is 
concentrated in Dublin, though it might soon expand to other cities.  

The  housing  stock  is  expanding,  though  the  pace  has  stagnated  in  the  last  two  years.    Annual 
housing completions increased by almost 40% annually from 2017 to 2019 to around 21 000. Due to the 
pandemic-induced  lockdown  of  the  construction  sector,  completions  stagnated  in  2020  and  2021  at 
around  20  500  units  (see  Graph  3.1).  After  the  re-opening  of  the  economy  in  Q2  2021  construction 
activity  restarted.  The  number  of  housing  commencements  substantially  increased,  exceeding  30  000 
units in 2021. This suggests that more completions are to be expected in 2022.  

The gap between supply and demand is set to remain large in the short term. Based on demographic 
and migration trends the government estimates net additional housing needs to be around 33 000 annually 
to 2030. Of these, around 14 000 are needed annually in the  Greater Dublin Area. These large housing 
needs are a consequence of the previous housing bubble, which bankrupted most local construction firms. 
Consequently, between 2009 and 2017, Ireland’s total estimated housing stock grew by only 35 000 units 
while the total population of Ireland grew by 263 000. 

(19)  Cronin and McQuinn (2021) Credit and Capital Markets, Volume 54, Issue 2, pp. 199–221 
(20)  Irish Rental Report Q4 (2021) Daft.ie 

11 

 
                                                           
Graph 3.1:  Housing units completions and commencements 

3. Thematic chapter: Housing market 

Four quarter moving sum  
Source: Central Statistics Office, Dept of Housing, Local Government &  Heritage 

The  expansion  of  the  housing  stock  in  commuter  areas  will  need  to  be  accompanied  by  critical 
infrastructure development. In 2019 and 2020 Ireland received country-specific recommendations with 
regard  to  public  transportation,  water  and  digital  infrastructure.  The  successful  implementation  of  the 
National  Broadband  Plan  and  National  Development  Plan  will  be  essential  to  ensure  that  new 
developments are populated.  

Housing demand remains strong as households funnelled their savings — built up over the course 
of the pandemic — into the real estate market. Pend-up demand led to new loans for house purchases 
to increase by 12.0% in 2021 after decreasing 8.6% in 2020. In addition, positive inward migration raised 
housing demand. The influx of refugees from Ukraine is expected to increase housing demand pressures. 
Population growth was concentrated in urban areas where the shortage of housing was most acute.  

A  sharp  increase  in  mortgage  approvals  suggest  a  backlog  in  demand  has  built  up  in  2021.  Data 
from the Banking & Payments Federation Ireland shows the number of mortgage approvals increased at a 
faster pace than mortgage drawdowns. This widening gap between approvals and drawdowns  — mainly 
driven  by  limited  supply  —  may  create  a  backlog  in  demand.  Such  a  backlog  could  contribute  to 
continued house price inflation in 2022. 

The government has actively intervened to address housing supply constraints. Measures introduced 
by  the  government  have  had  an  overall  positive  impact  but  need  monitoring  and  refinements,  some  of 
which  have  been  announced  under  the  new  “Housing  for  All”  plan.  The  plan  is  underpinned  by 
investments  of  more  than  EUR  20bn  over  the  next  five  years.  Some  measures  include,  amongst  many 
others: 

  Regulating  the  short-term  letting  sector  in  areas  of  high  housing  demand.  The  relevant  regulation 
came into effect in July 2019, yet some evidence (21) suggests compliance was weak. To tackle this, 
the government plans to introduce new regulatory controls in 2022.   

  A  simplified  vacant  site  tax  was  introduced  to  support  land  development.  A  similar  levy  was 
introduced  in  2017  but  some  administrative  deficiencies  have  limited  its  implementation.  A  new 
simplified tax of 3% of the market value of the land to activate vacant sites was therefore announced. 

  A  full  review  of  the  planning  process  began  in  2021  and  will  continue  in  2022.  This  includes, 
following  industry  insights  highlighting  planning  delays,  the  introduction  of  a  new  streamlined 
process  for  Large-Scale  Residential  Developments,  the  extended  use  of  Urban  Development  Zones 

(21)  The number of new tenancies registered with the Residential Tenancies Board temporarily increased significantly in Q1 2020 
following the introduction of travel and tourism restrictions and began falling in Q2 2021 as restrictions were gradually lifted. 
More information available here: gov.ie - Minister O’Brien asks RTB to initiate targeted campaign to identify and pursue non-
compliance with rent-setting (www.gov.ie). 

12 

0510152025303540ThousandsCommencementsCompletions   
                                                           
3. Thematic chapter: Housing market 

and  a  reform  of  the  judicial  review  process  for  planning  and  environmental  cases.  This  has  the 
potential to reduce housing construction times and costs. 

  Extensive  construction  of  social  housing;  this  was  initiated  by  the  2016-2021  “Rebuilding  Ireland” 
government programme but relied on short-term solutions involving leasing or acquisitions from the 
private market, which can exacerbate already increasing housing and rental prices. Efforts to increase 
newly built social housing were relaunched with additional resources made available. 

In addition, the government has implemented different schemes to increase housing affordability. A 
periodic  evaluation  of  these  schemes  is  recommended  so  they  can  be  quickly  adjusted  if  any  market 
distortions  arise (22).  Effectively  targeting  these  schemes  —  to  lower-income  first-time  buyers  (FTBs) 
only — remains crucial to reduce the risks of creating inflationary pressures in the housing market. The 
different schemes include:  

  The extension of the Help-to-Buy (HTB) scheme providing FTBs, under certain conditions, with a tax 
refund of up to 10% of a house’s purchase price. The government plans to review this scheme in 2022.  

  The introduction of a shared equity loan scheme to provide a 30% equity stake to FTBs of newly built 
homes (where HTB is also used, a maximum of 20% applies) to bridge the gap between their deposit 
and mortgage (combined) and the price of the new home. 

  The  extension  and  expansion  of  the  rebuilding  Ireland  home  loan  scheme  providing  lower  cost 
mortgages to FTBs who are unable to obtain sufficient funds in the mortgage market. In January 2022, 
the  government  increased  the  minimum  threshold  for  eligible  applicants  by  EUR  15  000,  while 
interest rates were cut by 0.25% 

Labour constraints pose risks to the effective implementation of the ‘Housing for All’ plan. To reach 
these highly ambitious construction targets, the government estimates the need to expand the number of 
workers  building  residential  housing  by  over  50%  by  the  middle  of  the  decade.  However,  while  in  the 
construction sector the total workforce stood at 158 300 at the end of 2021 — well below its peak of 239 
800  in  Q2  2007  (see  Graph  3.2)  —  unemployment  in  construction  remains  very  low.  Competing 
demand for  construction  skills  for  renewable  energy  projects  and  the  retrofitting  of  buildings  is  also 
expected to increase following targets of the National Retrofitting Scheme.  

The  government  is  seeking  to  support  the  development  of  the  construction  workforce.  During  the 
previous peak in 2007 a sizable minority of 40 700 non-Irish workers was employed in the construction 
sector,  most  of  whom  left  Ireland  following  the  housing  crisis (23).  Non-Irish  workers  were  close  to  25 
000  at  the  end  of  2021.  Stimulating  skilled  immigration  will  be  challenging  due  to  high  competing 
demand  for  construction  workers  in  other  EU  countries.  Furthermore,  the  number  of  registrations  in 
construction-related  apprenticeships  fell  to  historic  lows  in  2009  and  has  only  recovered  in  recent 
years (24),  leaving  a  sizable  gap  in  new  skilled  workforce.  The  “Housing  for  All”  plan  tries  to  address 
these challenges, but foresees a lag of several years for these measure to show effects. 

The  rising  cost  of  materials  may  affect  the  cost-effectiveness  of  planned  spending  increases  on 
housing,  as  well  as  the  delivery  time  of  the  relevant  plans.  The  cost  of  building  and  construction 
materials, which had increased by only 1.2% per year on average since 2016, rose by 8.6% in 2021. The 
highest  inflation  of  costs  came  from  rough  timber  and  reinforcing  metal,  which  increased  by  43%  and 
35% respectively. The reasons for these increases included higher shipping costs, factory closures due to 
COVID-19, price increases for iron ore and energy and the pre-selling of stock materials (25). In addition, 
Russia’s  invasion of  Ukraine  is expected to further increase  construction costs in the short term. While 
some  short-term  bottlenecks  are  expected  to  be  transitory,  competition  from  large  building  retrofitting 
investments  may  continue  to  keep  prices  amongst  the  highest  in  the  EU,  resulting  in  deteriorated 
affordability and completion delays. 

(22)  National Competitiveness & Productivity Council (2021) Ireland’s Competitiveness Challenge 2021 
(23)  Central Bank of Ireland (2018) “Where are Ireland’s Construction Workers?” Quarterly Bulletin no. 2 
(24)  Expert Group on Future Skills Needs (2019) Skills for the Construction Sector: Assessment of 2008-2018 Strategies  
(25)  Turner & Townsend (2021) Republic of Ireland market intelligence survey, Autumn 2021 

13 

                                                           
Graph 3.2: 

Employment in construction 

3. Thematic chapter: Housing market 

Source: Central Statistics Office 

Household Debt 

In the absence of a positive supply response, rising house prices may lead to higher household debt 
in  the  future.  Household  debt  was  for  84%  composed  by  mortgages  in  2021.  However,  the  overall 
household debt-to-GDP ratio has been on an downward path and is expected to have continued to decline 
from 35.9% of GDP in 2020 to 30.8% of GDP in 2021. This was mainly due to very strong GDP growth, 
at  13.5%  in  2021,  which  was  led  by  exports  of  multinational  corporations  and  a  recovery  in  domestic 
demand. Also, net credit flows (transactions) were overall close to zero. Compared to GNI*, household 
debt is expected to have fallen to around 60% of GNI* in 2021.   

A  tightening  of  credit  conditions  for  households  has  been  observed  in  the  second  half  of  2021, 
although the incomes and access to credit of mortgage borrowers seems to have been affected less. 
According to the ECB bank lending survey, credit conditions for households tightened in 2021 on account 
of  a  lower  risk  tolerance  from  banks.  However,  the  crisis  appears  to  have  affected  mostly  the  lower 
income echelons, which typically show lower debt levels, while the income of a large share of mortgage 
borrowers and potential borrowers with higher earnings, remained unaffected. The cost of borrowing for 
households was relatively stable in 2021, but remains above the average cost in the euro area. The share 
of fixed-rate loans for house purchase has been increasing since 2014 and amounted to more than four-
fifths of new loans in 2021. 

Overall, effective macro prudential policy settings suggest risks of another housing bubble remain 
limited. Overall, the financial sector looks much healthier compared to the run-up of the great financial 
crisis.  Since  then  Irish  banks  have  become  significantly  more  resilient    and  the  introduction  of  stricter 
rules  and  requirements  contributed  to  addressing  many  pre-crisis  vulnerabilities  of  the  banking  sector. 
The  European  Systematic  Risk  Board  identified  Ireland  as  having  medium  vulnerabilities  related  to 
residential  real  estate (26),  and  policy  measures  were  deemed  appropriate  and  sufficient  to  address 
underlying  risks.  Aside  from  more  stringent  capital  and  liquidity  requirements,  the  introduction  of 
mortgage-related measures in Ireland reduced the exposures that banks can have towards the real-estate 
sector, particularly by introducing binding Loan-to-Value and Loan-to-Income limits.  

(26)  European Systematic Risk Board (2022) Vulnerabilities in the residential real estate sectors of the EEA countries 

14 

   
                                                           
Table 3.1: 

Selected housing indicators, Ireland 

3. Thematic chapter: Housing market 

(') Forecast. The forecast of house prices is computed on the basis a housing valuation model shared with Member States in 
the context of the EPC LIME working group. The forecasts represent real house price percentage changes expected based 
on economic fundamentals (population, disposable income forecast, housing stock, long-term interest rate, and the price 
deflator of private final consumption expenditure), as well as the error correction term summarising the adjustment of prices 
towards their long-run relation with fundamentals. The source for the forecast of other variables is Ameco. 
(1) Price to income in level is the number of years of income necessary to buy an assumed 100m2 dwelling. See Bricongne, J-
C, A Turrini, and P Pontuch, 2019, “Assessing House Prices: Insights from HouseLev, a Dataset of Price Level Estimates”, 
Discussion Paper 101, European Commission, available in "https://ec.europa.eu/info/publications/assessing-house-prices-
insights-houselev-dataset-price-level-estimates_en".  
(2) Price to income and price to rent gaps are measured in deviation to the long term average (from 1995 to the latest 
available year).  
(3) The model valuation gap is estimated in a cointegration framework with nominal house prices as the dependent variable 
and five fundamental explanatory variables:  total population, real housing stock, real disposable income per capita, real 
long-term interest rate and price deflator of final consumption expenditure. See Philiponnet and Turrini, Assessing House Price 
Developments in the EU (2017) available in "https://ec.europa.eu/info/publications/economy-finance/assessing-house-price-
developments-eu_en" and revision notes presented to LIME in October 2019 and June 2020.  
(4) The average house price gap is the simple average of the price-to-inome, price-to-rent and model valuation gaps. 

Sources: Sources: (a) Eurostat, (b) Eurostat, OECD, ECB, BIS, Ameco, national sources, European Commission calculations, (c) 
European Commission calculations, (d) ECB, Ameco (e) Ameco (f) ECB . 

15 

2003-072008-122013-17201820192020202121Q121Q221Q321Q4House price developmentsUnitSourceReal house price, yoy growth%(a)8.7-13.38.78.10.3-0.24.32.51.16.67.0Nominal house price, yoy growth%(a)11.5-14.09.510.22.30.38.33.05.610.613.9Price to income in level (1)years(b)19.615.013.716.416.115.216.3Valuation gapsPrice to income gap (2)%(c)25.3-4.1-12.35.13.2-3.14.1-2.31.07.79.2Price to rent gap (2)%(c)35.77.3-17.6-10.3-12.8-12.7-8.0-13.4-11.3-4.6-3.4Model valuation gap (3)%(c)40.110.2-20.1-14.6-19.8-25.6-28.1-32.2-31.6-24.9-24.0Average house price gap (4)%(c)33.74.4-16.7-6.6-9.8-13.8-10.7-16.0-14.0-7.2-6.0Housing creditBank mortgages (% GDP)%(d)52.756.233.723.321.519.816.7Bank mortgages, yoy growth%(d)22.8-6.9-2.51.80.5-3.6-4.8Housing supplyResidential construction - dwellings  (% GDP)%(e)11.93.91.72.32.32.12.1Residential construction - dwellings, yoy growth%(e)27.5-28.314.119.5-1.4-7.21.0Non-residential construction (% GDP)%(e)6.84.74.44.75.04.64.3Value added in the construction sector, yoy growth%(e)24.2-15.08.59.15.1-10.2-4.7Building permits, yoy growth%(a)5.4-39.529.439.332.910.11.5Number of transactions, yoy change%(f)14.7-22.625.0Other housing market indicatorsShare of owner-occupiers, with mortgage or loan%(a)34.534.433.432.431.334.5