Ireland's prosperity will continue, albeit more slowly.

Any review of prospects for the Irish economy and its consumers should take into account the country's housing market. In its March 2, 2006 sketch of Ireland's economy, the Organization for Economic Cooperation and Development (OECD) said in classic understatement, "The Irish housing market is very buoyant."

Statistics provided by Ireland's Central Statistics Office (CSO) in June 2007 show that 88,211 private housing units were built in Ireland in 2006. When what the CSO calls "Social Housing" is added in (5,208 units), the total number of units built in 2006 comes to 93,419. The graph above uses the private housing number because it was reasoned this might provide a clearer picture of the market forces at work. In truth, the two charts would be nearly identical.

A July 12, 2007 story in The Irish Times (Dublin), citing The Central Bank and Financial Services Authority of Ireland (The Central Bank) as its source, said that 80,000 houses were forecast to be built in 2007, and that the estimate of new houses for 2008 was 77,500. The Times added, "In the long term, the economy only needs 60,000 new houses each year."

New housing is an important driver of consumer spending because in addition to spending on the unit itself, other durables and consumables are required to establish the new household.

Ireland's consumers are in an enviable position to afford new housing and all that goes with it because, according to April 2007 International Monetary Fund (IMF) estimates, Ireland is a distant second in per capita income in the world (us$49,939) after Luxembourg (us$88,529) and just ahead of nearly identical Norway (us$47,270) and the United States (US) (us$47,050.)

The previously cited OECD report credits Ireland's highly favorable economic status as resulting from, among other things, "A steep rise in the educational attainment of the working-age population." Free secondary education for all, established in 1967, was a major driver of Ireland's worker productivity increases.

Still, says the OECD, "Further efforts at all levels, from pre-primary school to tertiary education and continued learning, are needed to bring the education system nearer to best practice."

Surprisingly, although Ireland's hi-tech sector has developed a solid reputation over the past decade, the OECD says that most of the innovation has come from foreign corporations establishing units in the country. "The local research base remains thin."

Another challenge for Ireland is infrastructure. The growth of the country's infrastructure has not kept pace with the economy. Bottlenecks appear in several sectors--from electronic services to roads.

The Times story cited above attributing a 2007 GDP growth rate estimate of 5.0 percent to the Central Bank (in agreement with an IMF estimate) said that the pace of economic activity, and in particular house building, would begin to slow down as the year progresses. The IMF estimates that GDP growth in Ireland in 2008 will be 3.7 percent. Consumer spending will slow as well.

The Times says that 2008 will show a drop in consumer spending. "Consumer spending will also grow at lower rates next year [2008] as the impact of money maturing from Special Savings Incentive Accounts fades." Inflation will increase, too, from 3.5 percent to 3.75 percent.

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