Rent crisis: first sign of slowdown
First easing off for three years Supply and caps key, say experts Tenants can’t afford any more
SOARING rent prices are showing signs of slowing down for the first time in three years but remain at record high levels, according to a new housing report.
Housing experts said the rate of increases nationally is cooling, due to an improved supply of new homes and rent caps being introduced in areas of high demand.
Affordability has also been cited as a significant issue, with experts warning tenants may have reached a point where they will not be able to cover the cost of additional rent hikes.
Rent inflation fell from 12.4pc in mid-2018 to 9.8pc by year end, the slowest growth rate since 2016.
An analysis of the rental market by property website Daft.ie shows the average monthly rent nationwide at the end of last year was €1,347, an increase of €317 per month (31pc) compared with their Celtic Tiger high-water mark in 2008.
This represents a €600 per month (81pc) jump compared with when the market bottomed out in 2011. Writing in today’s Sun
day Independent, economist Ronan Lyons said Ireland was entering a critical threemonth window which will demonstrate if the country has turned a corner towards real price recovery.
“We are still discussing substantial price increases, even if in percentage terms the increases in key markets have fallen below a noteworthy threshold,” he writes.
“One possible reason for the slowdown in inflation could be that the market has reached the limits of what tenants can pay.”
He suggests improved supply is also having an impact, with increased availability helping to stem price growth.
There were 3,641 properties available to rent at the start of 2019, an 11pc increase compared with last year. Supply in Dublin increased by 18pc in this period.
“This could indicate that the mild improvement in market conditions in Ireland’s rental market may continue,” writes Mr Lyons.
According to the most recent Census, 500,000 households are in rented accommodation — about one third of the country’s homes.
Housing charity Threshold yesterday said the “pace and extent of rent increases year-on-year remains unsustainable”.
Property consultant and market commentator Philip Farrell told the Sunday Independent the country has reached a point where tenants will not be able to cope with further hikes.
“The Rent Pressure Zones have had an effect on inflation because increases are restricted to 4pc. However, you are after seeing a period where rental figures have gone up by about 80pc in recent years. When you have a sustained period of increases like that, it has to level off at some point.
“It gets to a point where people simply cannot afford to pay any more. Rent prices are way out of kilter with mortgage values. If you were to buy certain properties the mortgage is likely to be less than the rent. That cannot be sustained.”
For example, the average cost of renting a three-bedroom house in Dublin 8 is €2,190. According to Daft. ie, monthly mortgage repayments for a similar property currently stand at €1,637 (with a 3.5pc variable rate for 30 years and 85pc loan-to-value ratio).
The number of properties available to rent nationally rose by 11pc last year, mainly in Dublin where demand is greatest. Mr Lyons said if this trend continued prices should drop further.
Recent data shows record numbers of people are living in rented accommodation.
The Daft.ie Rental Price Report reviewing the 2018 market shows there were also signs of a two-tier recovery across the country.
It comes after Housing Minister Eoghan Murphy said he was encouraged by CSO figures last week showing a substantial increase in housing supply last year compared to 2017.
The figures showed an output of more than 18,000 homes last year — a 25pc increase in supply. However, this still falls well short of the more than 25,000 homes needed every year to meet demand.
Nationally, rental inflation fell to 9.8pc at the end of last year, down from 12.4pc six months earlier. The eastern seaboard accounts for much of this recovery, with double-digit rates of inflation still evident in Munster, Connacht and Ulster.
Some cities outside Leinster are seeing inflation hit two-year highs, but in Dublin, which has seen a significant ramp-up in supply, rent prices show signs of bottoming out.
Two-thirds of new homes to come on-stream last year were in the capital.
Report author Ronan Lyons said if the slowing down of inflation continued into the next quarter, it would show “perhaps the corner has been turned”.
Speaking ahead of the launch of today’s Daft.ie Rental Price Report, he added: “This underscores the importance of additional supply in solving the problems of the rental sector, which have been ongoing for nearly eight years.
“Construction of new homes remains focused on one-offs and estate housing, while the overwhelming need is for apartments, in particular for renters.
“It remains to be seen, therefore, whether the modest improvement in conditions over recent months continues.”
In Dublin, rents are now an average of 37pc above their previous peak. The greatest increases have been seen outside the capital.
Since 2008, prices increased in Galway city by 47pc. Cork city saw a 30pc hike in prices over the past 10 years.
Outside of the country’s major cities, tenants are now paying 22pc more than in 2008.
Last year, the cities outside of the capital saw the highest price increases.
Limerick city saw price hikes of 16.7pc. Waterford city and county saw prices jump 16pc and 15.7pc respectively. Co Galway saw prices increase by 15.6pc.
Meanwhile, Dublin and commuter counties such as Kildare (7.9pc) and Wicklow (9.5pc) saw single-figure growth.
Prices in Dublin city centre increased by 8.6pc last year. Rents have risen by 8.8pc across the rest of the city. West Dublin saw the biggest increases in the capital, up 9.9pc compared to the previous year.
Housing charities expressed concern about the price growth yesterday.
Threshold chief executive John-Mark McCafferty said he was worried about overheating in the housing sector and an over-reliance on HAP to provide for social housing, concerns also raised by the Economic Social and Research Institute and Oireachtas Housing Committee last week.
Last night the Simon Community called for greater protection for tenants.
“Enhancing security of tenure has to be an urgent priority so that people already housed can keep a roof over their heads and have greater certainty in their daily lives. People trapped in emergency accommodation need secure and affordable homes, with support where needed,” said a spokesman.
Philip Farrell said supply was key for the rental sector as more people moved away from buying their own home.
He said the market remained an attractive option for multi-national investors looking to buy up apartment blocks and let properties to tenants on long-term lets.
“Something that has become very significant here in the past 12 to 18 months is the build-to-rent sector,” he said.
“Large professional investors and pension funds are coming in and buying large quantities of stock.
“That has not been a feature of the Irish market in the past.
“A lot of it is to do with the likes of Facebook, Google and Microsoft. They have young workforces on significant salaries who are looking for quality rentals in the city centre. There is huge demand in that sector.”