The dramatic increase in residential rents is a cause of major concern and will potentially have significant adverse consequences for the entire economy, the State’s competitiveness watchdog has warned.
Soaring rents and rising house prices will inevitably fuel calls for higher wages, increase the cost of living and ultimately damage competitiveness, the National Competitiveness Council said. Office rents are also rising rapidly thanks to low supply, it added, saying that the availability and cost of property is once again threatening sustained cost competitiveness.
The watchdog warned that the State must not allow the property sector to undermine the economic recovery, and threaten its sustainability.
The report also highlights the high costs associated with a range of business services including postal and courier, legal services and market research.
Legal costs were 8pc higher in the third quarter of last year, compared with 2012. Legal costs were repeatedly raised by the Troika during the bailout years.
Services associated with the construction sector, the report pointed out, including architecture and engineering, have also been significant drivers of the service price increases over the past 12 months.
The NCC said these prices rises should serve as a “warning signal” that cost pressures are emerging in a myriad of sectors.
Professor Peter Clinch, NCC chairman, said the Brexit-induced weakening of sterling and the higher price of oil shows just how vulnerable Irish firms are to international shocks.
“There is a role for both the public and private sectors alike to manage proactively the controllable portion of their respective cost bases, drive efficiency and continue to take action to address unnecessarily high costs,” Prof Clinch said.
“Such actions will ensure that improvements in relative cost competitiveness are more sustainable, leaving Ireland better positioned to cope with external shocks.”
The NCC reports to the Taoiseach and the Government through the Jobs Minister on key competitiveness issues facing the economy.
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