Irish House Rents: Supply tightens in Dublin's commuter counties in Q 42014
By Michael Hennigan, Finfacts founder and editor
Feb 16, 2015 - 4:46 AM

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Irish House Rents:  Year-on-year inflation in rents nationwide eased in the final three months of 2014, according to the latest quarterly Rental Report by The national average rent between October and December was just under €950, that’s 9.7% higher than last year. However, this is down from a 10.8% annual increase in the second and third quarters and marks the first time since mid-2009 that rental inflation has eased. However, supply has tightened in Dublin's commuter counties says this national trend is being driven by a moderation in Dublin’s rental inflation, which has eased from 16.5% in April to below 10% by January.

In the other city centres, rents continue to rise but at a slightly slower pace. In Cork city, rents are 7.3% higher than last year. In Galway they are 7% higher, Limerick has seen a 6.2% rise while in Waterford city rental inflation was at 5.1% in the final three months of 2014.

Offsetting the easing in rental inflation in Ireland’s urban centres has been more rapid inflation, in particular in Dublin’s commuter counties. Rents across the four commuter counties were 14.1% higher than a year previously in late 2014 - the first time in this cycle that inflation has been slower in Dublin than in its commuter counties.

This is related to a significant tightening of supply. Nationwide, there were just over 5,200 properties available to rent on February 1st, down more than a quarter on the same figure a year previously. This is the lowest level of availability nationwide since May 2007.

Commenting on the report, Ronan Lyons, economist at TCD and author of the Daft Report, said: “The slow-down in rental inflation in Dublin at a time when new listings are sluggish suggests that a limit to affordability has been reached there. Over the last 12 months, availability has stabilised in Dublin at very low levels, while it has tightened further in the Commuter Counties. The underlying lack of construction in a city growing by roughly 10,000 new families every year has created a new generation of commuter, one driven not by preference for green space but by the hard maths of affordability.”

Year-on-year change in rents – major cities, Q4 2014

Dublin: €1,350, up 11.5%
Cork: €891, up 7.3%
Galway: €871, up 7.0%
Limerick: €702, up 6.2%
Waterford: €624, up 5.1%

Ronan Lyons adds: "Typically, inflation in rents eases either when demand falls or supply improves. Dublin’s population is currently growing by roughly 10,000 households a year but the housing stock is increasingly by barely 1,500 homes each year. Therefore, it’s clear that at an aggregate level, there is no lack of demand. Nor is there any evidence that incomes have gone from rising to falling in the last few months. Indeed, if anything, the real economy appears to be improving. The natural place to look, then, is supply. However, as mentioned above, construction of new homes has effectively ground to a halt. Relief from supply pressures could still come from an increase in listings, though. Somewhat surprisingly given easing rental inflation, supply tightened further in 2014. Over the course of 2014, just 34,000 properties were listed for rent in Dublin. This is 13% less than in 2013 and over 40% less than in 2011. So a city that has grown by perhaps 40,000 new families – most of them renters – since 2011 has 40% fewer rental listings each year. The 31% increase in rents since the end of 2010 makes sense when these figures are borne in mind.

The graph above shows an index of the total stock available to rent in both Dublin and its four commuter counties since 2011. While there are seasonal effects, the overall trends are very similar up to the start of 2014, with a significant overall reduction in availability in both regions between 2011 and early 2014. In the last 12 months, however, availability has stabilised in Dublin – albeit at very low levels – while it has tightened even further in the commuter counties. Whereas there would typically be two properties on the rental market in Dublin for each one in commuter counties, this ratio has risen to 4:1 in recent months."

Daft report [pdf]

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