Rental prices soar as the number of available properties hits record low

Rental prices continue to soar as the number of properties available hits an all-time low, according to the latest report from daft.ie.

Rental prices soar as the number of available properties hits record low

The average cost of renting a house in Ireland now stands at €964 a month, an increase of 9.3% on this time last year.

As of November 1, approximately 4,000 homes were available to rent across the country — the lowest number of rental properties since Daft.ie began their analysis of the market 10 years ago.

There were over 20,000 properties available to rent across the country in November 2009.

Rents rose by an average of 3.2% between June and September, the largest three- month increase since early 2007 while, for the second quarter in a row, inflation in Dublin rents (8.9%) remains below inflation outside the capital (9.7%).

The highest rate of inflation occurred in Cork City where rents are now 13.5% higher than they were a year ago. Galway, Limerick, and Waterford cities also saw levels of inflation higher than Dublin, with rises of 12.2%, 11.4%, and 9.6% respectively.

Supply in the Munster area has also dramatically decreased — as of November 1 there were 650 homes to rent in the area, down from 1,100 a year previously, representing a reduction of 40%.

It is the lowest number of rental properties available in the area since records began in 2006.

“The latest rental report suggests that the market reacted to talk of rental controls, with, for example, rents rising by 7% in Cork in three months and by 6% in Galway — by far the largest three-month increases seen in a series that extends back ten years,” said author of the report Ronan Lyons, who is also an economist at Trinity College Dublin.

“Ultimately, while controls on rent increases may help those at risk of becoming homeless, they do nothing to help those already homeless.

"The much more pressing issue that needs to be addressed is the lack of supply, which ultimately depends on the cost of construction.”

Mr Lyons said the solution to the problem is two-pronged — improving rent subsidy and reducing the cost of construction.

“If people are out of a job, or if they’re only able to get part-time work, and their income isn’t big enough to cover the cost of their own accommodation, we need to make sure the proper type of subsidy is in place.

"I don’t think we have that yet with a fixed supplement,” he said.

“The fixed supplement just pits one group of tenants against another. If you cut rent supplement the working tenant benefits, if you raise rent supplement the welfare tenant benefits.

"And that’s not really the way social housing should work, it should be based on what level of income you do have and then topping that up.

"So the closer you get to being able to afford your own accommodation, the smaller the subsidy you get.

“Then for people who do have sufficient income it’s about reducing the cost of construction.

"The central bank caps house prices relative to people’s incomes and we need to do something similar for building costs because it looks like they’re way out of line with what people earn day to day.”

Meanwhile, the Government’s imposition of a two- year rent freeze may discourage people from building new houses.

In its fourth post bailout monitoring report, the IMF outlined a range of issues impacting the housing sector.

These included “financial weakness of builders, tight lending standards, and high development costs including from onerous building codes” .

However, it warned the Government’s responses to these problems. including rent controls, may actually contribute to a shortage in housing supply.

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