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| Source: AIB Economic Research
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AIB Bank says today in its March 2008 Irish Housing Bulletin that population and employment growth are key to housing market demand. Both of these have been driven in recent years by high levels of net inward migration. Census data show that non-Irish nationals accounted for some 60% of total population growth over the April 2002 - 2006 intercensal period. Since then, AIB has estimated that net inward migration accounted for almost 50% of household formation in 2007 and the occupancy of some 30% of the increase in the housing supply in 2007.
Quarterly National Household Survey data indicates that non-Irish nationals remained the main driver of population and employment growth last year.
However, AIB says that there are distinct signs of a slowdown in the pace of growth of the numbers of non-Irish nationals in employment. In the recently published data for the fourth quarter of last year, the CSO estimate that non-Irish nationals still accounted for over 75% of total employment growth in the year to Q4 2007. However, in absolute terms the number of non-Irish nationals in employment increased by less than 50,000 on a year-on-year basis for the first time since EU enlargement in May 2004.
Similarly, there is increasing evidence from the PPS data that the economic slowdown in Ireland and the sharp contraction in residential construction activity is dampening the level of inward migration flows. The number of PPS numbers being issued to those from the Accession States has been in decline since around the start of 2007. Furthermore, the pace of decline has accelerated, with the number issued down some 30% y-o-y in the three months to February this year, or 36% if Romanian and Bulgarian citizens (who have had more limited rights to PPS numbers since these two countries joined the EU in January 2007) are included.
However, The Bulletin says that it is difficult to conclude that the slowdown in Irish residential construction activity is the only cause of the fall-off in immigration flows from the Accession States. The Irish experience is broadly in line with that in the UK, which, in Q4 last year, saw a 25% year-on-year decline in the number of applicants from the Accession countries for its Worker Registration Scheme.
It may also be that improved employment and wage prospects in their home countries are beginning to stem the flow of workers wishing to find employment in Ireland (or the UK).
Despite the distinct declines, the most recent data still show significant inflows of non-Irish nationals and a substantial increase in employment by non-Irish nationals. There were 18,290 PPS numbers issued to those from the EU-12 Accession States in the the three months to February this year compared to 16,167 in the three months to February 2005, the comparable period following Accession in 2004.
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| Source: AIB Economic Research
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However, the Live Register data point to a marked deterioration in the labour market situation in recent months. Notably, there has been a substantial pick-up in unemployment amongst males, in particular, as the contraction in housing market activity bites, a trend which will undoubtedly have significant implications for migration flows. Thus, AIB says that the labour market data and PPS data need to be carefully monitored in terms of near term housing demand. However, in any event, the sharp contraction in construction activity means that housing output is likely to fall below demand levels, even assuming significantly reduced demand from non-Irish nationals.
