Irish House Rents: The year-on-year increase in the average rent nationwide accelerated to 7.1% in the final quarter of 2013, up from 2.2% a year previously, according to the quarterly Daft.ie Rental Report released today. The average advertised rent nationwide is now €865, compared to €790 two years ago. The average rise in Dublin was 11.2% to €1,210.
The acceleration in rent inflation is due mainly to trends in Dublin, with rental inflation in the capital rising from 4.9% to 11.2% in the same period. Rents are now 17.6% higher than their lowest point in this cycle, which occurred three years ago, and 15.7% below peak levels of 2007. The rent increases are related to very tight supply, with fewer than 1,500 properties available to rent in Dublin on February 1, compared to over 6,700 on the same date five years previously.
Outside Dublin, rents in the other cities are rising but less rapidly, with the exception of Waterford city, where rents continue to fall, at a rate of 0.6% year-on-year. In Cork and Galway cities, rental inflation is above 4% (at 4.2% and 4.4% respectively), while in Limerick, the annual increase in rents has been 3.6%. Outside the cities, rents rose by 4.6% in Leinster but were largely static in Munster (a rise of 0.8%) and Connacht-Ulster (no change).
Commenting on the report, Ronan Lyons, economist at TCD and author of the Daft Report, said: "The on-going acute shortage of rental accommodation in Dublin continues to affect rents in the capital. With no sign of new supply coming on stream any time soon, the onus is now on the government to encourage construction in the capital. This could be best done with reform of land use and the planning process. Elsewhere, rents are largely stable, although if rents continue to rise at close to 5% a year in other cities and in Leinster, this will be problematic for Ireland's competitiveness."
Ronan Lyons added: "The clear signals the market is sending out about a surplus of demand over supply in Dublin in particular raise questions about Ireland's construction sector. The 36 months from January 2011 to December 2013 saw barely 2,000 new dwellings started in Dublin, whereas best estimates suggest that the capital currently needs that number of new homes every four months. Until construction restarts in Dublin in a meaningful way, it is quite likely that we will see rents continue to rise in many parts of the city, while the next generation of tenants is pushed further out from the city and their jobs.
For much of the last half-century, with renting in decline, trends in the rental sector were something of a niche interest. However, the fraction renting in Ireland has doubled in less than a decade. With nearly one in three households now renting, the rental market can no longer be treated as a topic of only secondary importance. Ireland's competitiveness depends on cheap accommodation - both for sale and to rent - so double-digit inflation in rents concerns everyone."
Year-on-year change in rents - major cities, Q4 2013
Dublin: €1,210, up 11.2%
Cork: €831, up 4.2%
Galway: €814, up 4.4%
Limerick: €661, up 3.6%
Waterford: €594, down 0.6%