Ireland’s FDI success challenged by housing woes
Development in the 'Silicon Docks' area of central Dublin. Image via BloombergView original article at FDI Intelligence
Business leaders warn a lack of affordable homes puts Irish economic model at risk
destinations for foreign investment because a scarcity of affordable housing is having an impact on companies’ ability to find accommodation for their employees.
“The cost and availability of housing is a serious deterrent to those who wish to make a home and work in Ireland,” says Martin Shanahan, the head of industry and FDI at Grant Thornton and the former chief executive of IDA Ireland.
Chambers Ireland, a national business lobby group, warned in August that a lack of supply in the housing market and renting options is making Ireland less attractive for investment.
“Even though Ireland is open for business, rapidly increasing the supply of housing of all types … is vital to help address housing affordability issues and to ensure that Irish cities can continue to attract and retain FDI,” it said.
The countrywide housing crisis is most pronounced in Dublin, which has high wages and attracts the lion’s share of Ireland’s FDI. Average home sale prices in Dublin county have jumped by 70% since 2015, standing at about €618,000 in mid-2023, according to Geowox, a home data provider. Figures from Catella show it cost about €5500 per square metre for an apartment in Dublin in 2022 – above Europe’s median cost of €4805, but below expensive cities such as Geneva (€15,430), London (€13,750) and Paris (€10,100).
Residential Tenancies Board data for the first quarter of 2023 shows average rents for new tenancies in Dublin were up by 9.6% from a year earlier and almost double average rents outside the capital. More than 1000 foreign investments have been announced in the Irish capital since 2015, ranking it as Europe’s fourth top destination city behind London, Paris and Berlin, according to fDi Markets.
Dublin attracted its largest number of FDI expansion projects ever in 2022, including Pfizer’s decision to invest €1.2bn at its Grange Castle manufacturing site. But Mr Shanahan notes that while housing is the number one political priority for the Irish government, demand continues to outstrip supply.
“It will act as a drag on future investments and the ability of existing investment to grow within Ireland if the housing issue isn’t addressed in a timely manner,” he says.
Dublin ranked as the ninth most expensive city in Europe for expatriates to move to in 2023, up from 13th place in the previous year, according to ECA International, a consultancy focused on international worker migration.
“One must question our ability to continue to attract FDI if we do not have enough accommodation for workers,” said Simon McKeever, CEO of the Irish Exporters Association, during a parliamentary committee in March. “It is now critical. Something needs to be done about this or it will affect our long-term economic model.”
A number of multinational and local business leaders have voiced their concerns. Housing is “making the decision to … start strategic projects in Ireland in the future more difficult”, said Michael Malewski, CEO of Germany’s Lufthansa Technik Turbine Shannon, during an interview with RTÉ in February.
Lufthansa has an aircraft engine repair operation just outside Dublin in Celbridge, County Kildare, with a €28m facility that opened in November 2022.
Kealan Lennon, CEO of Dublin-based payments platform CleverCards, says that there are serious challenges to hiring created by the housing crisis, “particularly in Dublin where property prices and rental prices remain high”.
Although the fintech company has successfully onboarded staff internationally, there remains a “deterrent for some international candidates, especially those looking to relocate back to Dublin or even Ireland”, said Mr Lennon.
Housing was also at the heart of a public controversy at Twitter, which has recently been rebranded as X. After buying the social media company last November, Elon Musk ordered all its Irish staff to return to the office of its European headquarters in Dublin. This led to widespread consternation over complaints that this would be impossible for many staff members due to a lack of available and affordable rental properties in the Irish capital.
Some multinational firms are considering their own solutions, buying up property for staff members and even building homes. Neil Sorahan, chief financial officer of Ryanair, told Reuters that the company has been renting apartments in Dublin and may start to buy some units in the near future.