Landlords may have front-loaded rent hikes

Driven by fears of a Coalition clampdown, landlords likely hiked rents to pre-empt potentially worse controls.

CSO figures published yesterday showed rents rose again sharply in October as Environment Minister Alan Kelly and Finance Minister Michael Noonan hotly disputed a range of measures to cool a red-hot rental market.

Those measures — only finally unveiled this week included proposals to freeze rent hikes for two years — but did not embrace a mooted measure to link rents to the overall consumer price index.

As the Coalition debate flared, fears of tighter controls may have spurred landlords to raise rents earlier than they might have to beat potential stricter controls.

“Anecdotal evidence suggests an element of positioning as the rent controls debate intensified,” said Philip O’Sullivan, chief economist at Investec Ireland.

Landlords probably brought forward rent hikes in case the Government brought in controls that would have tied rents to the cost of living. Some landlords front-loaded increases in case “the more interventionist polices sought by Minister Kelly came to fruition”, he said.

Rents rose by a significant 0.5% in the month and are now 10.3% more expensive than October 2014, the CSO figures show.

An analysis by the Irish Examiner suggests rents are now around 30% more expensive than at the depth of the economic bust and are dearer than at any time since October 2008 as the housing boom peaked on the eve of the property collapse.

Detailed CSO figures show that rents started climbing in July 2012. October’s 0.5% increase comes after rents surged 1.2% in September. That brings rental inflation to 10% so far this year.

However, noting that rents have been rising for some time, Mr O’Sullivan said that rental price increases would have been expected to rise strongly anyway because there are too few houses being built.

Surging rents have become such a hot election issue because so many people face huge cost increases at a time when wages remain flat.

In contrast, mortgage costs — as measured by the CSO mortgage interest sub-index — fell again sharply in October, by 1.9%. They are 9.3% lower than a year ago.

Analysts see no quick fix for the housing crisis.

In a report published this morning, Goodbody Stockbrokers’ economists Dermot O’Leary and Juliet Tennent say housing “is the biggest bottleneck” in the economy, “with supply constraints remaining the key constraint to a healthy market”.