Rents record biggest monthly drop in 11 years as supply surges

THE cost of renting fell last month due to the economic fallout from the Covid-19 pandemic.

Rental costs were down by 2.1pc on average in April, compared to March, according to the latest rental report by Daft.ie.

And there has been a 40pc rise in the number of homes available to rent.

It is now expected that rental costs will keep falling this year due to the sharp rise in unemployment.

Rental costs also decreased in the last three months of last year, which was the first time in more than seven years they have fallen quarter on quarter.

But the fall in April is the largest one-month decrease in rents since March 2009.

This means it is the biggest drop in rental costs in more than 11 years.

The cost of renting is still higher than a year ago because of rises in the months before April.

The average monthly rent nationwide stood at €1,418 in the first three months of this year. This is €676 per month higher than the low seen in late 2011.

Over the first three months of this year rents rose by 3.8pc, largely because of sharp increases in January and February.

However, the percentage rise for the first quarter marks the lowest rate of inflation since the end of 2012.

Rental costs could keep falling, according to author of the Daft.ie report Ronan Lyons.

“The prospects for the rest of the year must surely be for rents to fall as unemployment rises,” he said.

And the number of homes available to rent nationwide on May 1 was almost 40pc higher than on the same date a year earlier.

There were almost 3,800 homes on the market, compared to 2,700 in May last year, Daft.ie said.

This is despite fewer rental ads being posted.

Prof Lyons said this was down to the fact that a number of landlords have withdrawn their rentals from short-term listing sites like Airbnb and are putting them on the market.

But it was mostly down to a crash in demand, with students returning home and few people moving to the cities to take up new jobs, he said. Prof Lyons added that the rental market could be more affected than the house sales market in this downturn.

This is due to the fact that we have extensive migration in and out of the country each year.

Migrants are mostly renters and if Covid-19 results in a fall in migration that will impact the rental market.

The early 2020 trends have been broadly similar across the country, with rents rising by close to 4pc in many areas in the year to March, before falling up to 2pc in April.

In Dublin, rents fell by 2.5pc in April, compared to March.

In the four other major cities, they fell by an average of 2pc.

Prof Lyons, who is an economist at Trinity College Dublin, said before Covid-19 stopped the economy in its tracks there were additional rental properties being built.

“Figures in this report show that over 35,000 new rental homes were in the pipeline when Covid-19 shut down the construction sector.”

The pandemic is unlikely to change the fundamentals driving housing need.

He said this meant the immediate impact of the pandemic will mean lower rents, but the longer-term effect could be to worsen the accommodation shortage.