Irish residential rents across the country rose by just over 1% in January, according to the latest report published by the property website, Daft.ie. This increase while marginal is the first time rents have risen since they began to fall 24 months ago. The national average rent now stands at €765, almost 25% below peak levels seen in early 2008. It's likely floor has not yet been hit.
The January increase follows sharp falls in rents during 2009. Over the course of the year, Dublin rents fell almost 19%. Rents in Cork, Limerick and Waterford cities fell by 16%, while Galway rents fell by 11%. Elsewhere in the country, rents fell by an average of 15%. Over the past 2 years the number of properties available to rent has increased from an average of 6,000 at any one time, to over 23,000 in August 2009. In February 2010 that number has fallen to 19,000 - a drop of 20%.
Commenting on the report, Ronan Lyons, Economist at Daft.ie said: "It is too soon to say definitively whether rents have levelled off, but the January increase does seem to be broadly consistent around the country. The levelling off is most likely a result of a steady fall in the number of properties available to rent nationwide. Over the past 5 months we have seen the stock of property available to rent fall by more than 20%."
Goodbody economist, Deirdre Ryan, commented: Economic View; Rental levels at their floor? – not likely - - "The first daft rental report for 2010, released this morning, indicates the first signs of stabilisation in the rental market. Asking rents on Daft.ie rose 1.5% mom in January, marking the first time since February 2008 that rents have recorded a monthly increase. On an annual basis, rents are still down 14% yoy. Were December to represent the trough, in terms of rental levels, this would imply a peak to trough decline of 26% in private residential rents. According to the CSO, (the other source of data on rents), private rents were down 25% from the peak in Q4, the latest data available.
Today’s report shows that the stock of properties for rent has continued to drop, and now lies 20% below the peak levels recorded last August. Nevertheless, despite these data, we would be reluctant to suggest that the floor in rents has been reached just yet. For one, outward migration continues to feature. We do not have official timely data on this area, indications suggest that outward flows have continued apace of late, while inward migration also continues to slow (new PPS issuances were down 53% yoy in Q4). Furthermore, while the rental stock level has retreated from last years peaks, the current level still remains very high when viewed over a longer time horizon.
For instance, in Q1 2008 the stock of properties for rent stood at just less than 10,000. As such, it is very unlikely that January’s data marks the beginning of a sustained upward trend in rents. Notwithstanding the fact that the bulk of the decline in rents has occurred (we estimate a peak to trough decline of 30%), in our view there is little justification for upward pressure on rental levels in the near term. We estimate that rental yield currently stands at 4% nationally, up from 3.3%. Factoring in a 30% peak to trough decline in rents and a 42% peak to trough decline in house prices (house prices down 32% from peak currently according to the permanent tsb index), would see the rental yield adjust to 4.5% by the end of 2011. So, while much of the adjustment has already occurred, we are not there just yet. "
Michael Taft, researcher at trade union Unite, commented for the report: "Though numerous commentators are talking up the prospect of 'turning the corner', we may be entering a period of what the IMF has described as a 'statistical recovery but a human recession', something the Government's deflationary policies are clearly engendering."
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