The Central Bank has said it will be “challenging” for the Government to meet its target of building 300,000 homes by the end of 2030.
The bank modestly increased its forecast for residential construction over the coming years.
It said it anticipated 33,000 homes would be built this year, 37,000 next year, 40,500 in 2027 and 44,500 in 2028.
The bank warned bottlenecks in housing supply and high construction costs “may continue to push up rents and housing-related inflation which in turn could contribute to upward pressure on wages and goods and prices”.
In its latest economic forecast, the bank said there will be slower growth in the Irish economy next year with higher inflation.
It said the domestic economy would grow 4% this year and an average of 2.9% between 2026 and 2028.
The Central Bank said: “The rapid growth in employment and incomes that underpinned consumer spending since 2021 is expected to continue to moderate, feeding into a lower projected pace of growth in modified domestic demand.”
The bank also said the strong growth in employment of recent years will ease back.
It said the numbers of people in jobs will rise by less than less than 2%, while the unemployment rate will be an average of 5% over the coming years.
It said inflation would be an average of 2% between now and 2028.
Robert Kelly, the Central Bank’s Director of Statistics, said: “Despite the notable challenges the Irish economy has faced this year it has shown resilience throughout 2025.”
“Multinational sectors that predominantly export are adapting to a changing international environment for trade and investment, and so far that adjustment has been relatively benign for Ireland.
“Domestic activity signals are more mixed, with data pointing to a slower pace of growth and higher inflation.”
Mr Kelly told RTÉ’s Morning Ireland that investment will “moderate” in the multi-national sector but that construction, fuelled by homebuilding, will join investment as a generator of growth in the economy.
He said the Bank sees “green shoots” in the level of “commencements” in house building, evident in the number of planning applications and approvals so the Bank is “revising up” its forecast for the number of home completions “even in the near term.”
He said: “Our central forecast is we will get to about 155,000 [new] homes by 2028, which does leave a lot to do in the last years.
“But there are potential for upsides in some of that [prepared land, planning, productivity in the construction sector].
“So if we were to see more of this come together earlier, we would see a case that we could deliver more than that [155,000] in 2028.”
Kate English, Chief Economist Deloitte Ireland, said growth in homebuilding “is still just simply not enough and that growth is still happening too slow.”
“Estimated annual demand [for new homes] sits at plus 50,000 [homes],” she said. “So if we only deliver that 33,500, there’s quite a shortfall.
“That undersupply within the housing market and that continued upward pressure on prices I think is likely to remain.”
Ms English said the many housing policies announced this year have not yet had time to “have an impact on the market,” and upward revisions in housing completions for 2027 and 2028 are “some of those beginning to come into play.”
She said the first half of 2026 “is going to be really telling.”
“We need a couple of pipeline indicators to turn the tide a little bit…planning application numbers and planning permission numbers, they’re still very low, and commencements.
“We look at completions all the time, but commencements are those homes that start on site and in reality will be those units completed in [20]26, ’27, ’28.
“If they do not rise, you don’t reach those numbers,” she said.
Meanwhile, Mr Kelly said that Ireland’s labour market remains strong but is “cooling”, leading to a rise in the unemployment rate to 5%.
“We really do see vacancies cooling, so the demand for labour compared to where it was a year or two ago, where it was very, very high – we are seeing that cooling,” he said.
“In particular we’re seeing it in younger cohorts entering the labour market.
“A lot of people would point to the likes of AI and the impact that’s having on the younger cohorts.”
Mr Kelly said the Central Bank was not predicting job lay-offs and it does not “necessarily see” youth unemployment going up as a “warning light yet,” but rather a “rebalancing relative to the hot labour market” there has been up to now.
He added that food price inflation is expected to drop next year from a high of 3.7%.
Mr Kelly said “leading indicators” such as “the price of agricultural inputs, for example, across the board all of these they are pointing downwards when you look out over the next year or two.”
However some food price inflation is related to “one-off events…and a lot of these are climate-related,” he said.
Mr Kelly said increases in foodstuffs such as coffee, and chocolate were because of droughts in Africa and elsewhere that produce the crops for these.
And while moderations in price are expected, the “potential risk” remains for prices to remain high “if we see additional shocks.”
