Perfect storm building for housing crisis

The deepening housing crisis could be heading for a perfect storm, with one new report showing record high rents and plummeting stock, and another report projecting a 20% rise in house prices in the next three years, writes Noel Baker.

The latest rental price report, covering Q3 of this year, shows rents have risen for the 21st consecutive quarter and that the average rent across the country is €1,198 — an 11.2% increase on the same period last year.

The report, compiled by assistant professor of economics at Trinity College Dublin, Ronan Lyons, also shows that, on November 1, there were fewer than 3,400 properties available to rent nationwide — down over 16% compared with a year ago.

The situation is most acute in Dublin, yet there were just 251 homes to rent between the cities of Cork, Galway, Limerick, and Waterford on November 1, with Prof Lyons saying the public is “starved of rental supply”.

The report also shows it is typically cheaper to have a mortgage on a smaller property, such as a one-bedroom apartment or a two-bed property, than it is to rent it, while the same is true in many parts of Dublin and in cities outside the capital for three-bed properties.

Four of the five largest recorded quarterly increases in rents having happened since the start of last year, while recently published figures showed homelessness had reached record levels in September, with 8,374 people accessing emergency accommodation.

Prof Lyons said the rental figures did not make happy reading, adding: “Extra supply is quite simply the only solution.”

He said the country needs close to 50,000 homes a year, including more than 15,000 new rental homes annually, and said capping rental increases would only tackle the symptoms, not the cause.

Focus Ireland advocacy director Mike Allen disagreed, stating that while supply was the answer, the short-term impact of the crisis could not be ignored, claiming “you have to keep the patient alive”. Demanding urgent action from the Government he said tenancies needed to be protected, particularly around landlords seeking to remove tenants due to renovation or selling up.

Mr Allen added that the housing market was witnessing “a collision of different forces” — a view bolstered by another report, published today by the Economic and Social Research Institute which suggests house prices could rise by 20% over the next three years.

Irish house prices: Déjà vu all over again? by ESRI research professor Kieran McQuinn says the possible 20% increase is based on strong projected economic growth and that while the Irish housing market is not overheating at present, government policies should focus on increasing supply.

Threshold chief executive John-Mark McCafferty said house price rises and soaring rents “absolutely” created the potential for a perfect storm where even more people struggled to access the property market through buying or renting.

He said rent caps had to be utilised, adding: “Rent pressure zones are not perfect but where they are working they are benefitting tenants.”

However, he said pressure zones were not being adhered to by some landlords and a transparent rent register should be considered.

Stephen Faughnan, chairman of the Irish Property Owners Association, said that rents were rising but landlords were not showing net increases in their rental income.

Pressure points

• €1,198: Average nationwide rent;

• Rents rose 3.4% between second and third quarters;

• €1,995 — country’s highest average rent (South Dublin);

• Average rent in Cork City is €1,144. In Galway City, €1,057; Limerick city, €956; and Waterford, €797;

• House prices could rise by 20% by 2020;

• Fewer than 3,400 properties available to rent nationwide on November 1.

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