Dr. Martina Lawless:

There is a strong argument in favour of increasing housing activity and supply in the country. The risk we are talking about is primarily that this individual sector is likely to grow strongly - and there are many arguments in favour of such growth - but that it should not distort the overall balance of the economy in the way it did leading up to 2007, where the economy became concentrated and tax revenues became concentrated in revenues from a single sector. Increased activity in the housing sector, once it picks up - we are not saying that it should not pick up - should be counterbalanced by a dampening down in other sectors in the economy.

With regard to immediate risks to competitiveness in the absence of an increase in housing supply, if increases in housing costs, both in house prices and in the rental sector, continue, there will be risks to the overall competitiveness of the economy in that these might feed into price pressures and wage pressures. We have not seen much evidence of wage pressures in the economy, but there is a risk that continued increases in the cost of housing will feed into wage demands and a loss of broader competitiveness. All of this can further reinforce the social argument for increasing housing activity and the building up of housing supply. I emphasise that increasing housing supply and the extra activity taking place in that sector should be offset a little bit by dampening down activity in other sectors. A previous estimate a number of years ago by the ESRI suggested that an increase of approximately 10,000 housing units generally added 1% to GDP growth. That gives a sense of the scale of how increased activity in the housing sector will feed into overall economic activity.