The rental market is “in crisis” with landlords likely to increase rents this year by 8% despite rent caps of 4% in urban areas, industry group the Society of Chartered Surveyors Ireland predicted in key 2018 forecasts, writes Eamon Quinn.
The warning comes as international rating firm Fitch separately highlighted the Irish government’s incentives for helping to drive residential prices. It forecasts double-digit price growth this year, the only country in the world it believes will post such house price inflation rates this year.
“Ireland is the only market where we forecast double-digit price growth, as demand is boosted by government support for first-time buyers,” the rating firm said in its major forecasts in its global housing and mortgage outlook.
The Society of Chartered Surveyors Ireland said that its survey showed that most of its members reported that buyers’ price expectations had risen during 2017.
“The survey predicts that despite the introduction of rental caps in Dublin and Cork, residential rents will rise on average by 8% nationally. Most surveyors believe the rental market is in crisis and that the rental cap has forced a significant number of landlords to exit the market,” the body said.
The surveyors said the 4% rent cap did not apply to new tenancies or landlords carrying out major refurbishments.
The surveyors predicted prices will rise the most in Leinster outside Dublin, where prices for a two-bed apartment will rise 10% and by 9% for a three-bedroom semi.
At a median price of €325,000, the most expensive homes are in Dublin; followed by €200,000 in the rest of Leinster; €163,000 in Munster; and a median price of €129,000 in Connacht-Ulster.
It warned that shortages were driving prices higher, and it was concerned about the start of new housing schemes, particularly in Dublin.
“Surveyors around the country are hugely concerned at the low level of affordable housing which is being constructed for middle-income earners. Many believe this is because it is simply not economically viable to build affordable new homes in urban areas, where demand is highest,” said John O’Sullivan at the SCSI.
“While surveyors outside Dublin believe the Help to Buy scheme is boosting supply by encouraging housing construction, those in Dublin believe it has had less of an impact,” he said.
“One of the main contributors to the cost of new housing is the rising price of development land. Our report found the price of residential development land increased by 14% nationally in 2017 and predicts it will increase by a further 11% this year. A 25% increase in two years is simply not sustainable and one has to ask in light of that rate of increase if the changes made to the vacant site levy tax in the budget will be sufficient.”
In its report, Fitch said that “a hampered construction industry” meant Ireland posted increases in rents of 19% since 2010.
“Our 5% growth forecast for the Netherlands would lead to national prices passing their previous third quarter 2008 peak.
“The UK will see a second consecutive year of flat prices due to Brexit uncertainty, stretched affordability and low-income growth. Spanish and Portuguese home prices will continue to recover with growth forecast at 4% to 5%,” Fitch said.