New construction the key solution to reducing rents
9th June 2016
The RTB / ESRI residential rent index for Q1 2016 was released today and shows that overall Dublin rents increased by 0.2% in the three months and by 8.7% in the year. The breakdown between houses and apartments was relatively similar, increasing by 0.6% and 0.4% respectively in the quarter and by 8.4% and 8.1% in the year.
The annual rate of inflation in rents in Dublin has remained somewhat steady over the last four quarters at about 8.5%. However, this is less than the 10% increase experienced in mid-2014. Rents in Dublin are now slightly ahead (0.2%) of where they were at the market peak at the end of 2007.
Commenting on the Dublin rental market, David Byrne, Director of Residential at Lisney said:
“The rate of increase in Dublin rents is too large. We should not be experiencing growth of more than 8% per annum. A more sustainable level is about 2%. Today’s results show that the average rent of an apartment in Dublin is now €1,306 per month. But it must be remembered that those seeking apartments in the city centre will have to pay more than this average figure, even for one-bed units. From our experience, a one-bed apartment in the city centre is currently achieving €1,400 per month at a minimum with larger units achieving significantly more. In terms of houses, the significant shortage of family homes available to rent is well highlighted. While the average rent of a house in Dublin is €1,454 according to the RTB, we have found that in many cases, very few houses of three or more bedrooms are available below €2,000 per month.”
Commenting on what can be done to slow down the pace of growth, Mr Byrne said:
“We all know that lack of supply is the key reason for growing rents. The new Government and Minister Coveney now need to get on with putting in place an action plan to get more new homes built across the social, affordable and private sectors. This can be achieved through reductions in the amount of tax taken on new construction, streamlining the planning system, and putting in place affordable finance for developers. In addition, the Government could look to reduce some of the additional costs it has imposed on private landlords in recent years, notably reducing mortgage interest relief, subjecting rent to PRSI and USC which can often be at a loss and making the landlord liable for the local property tax. This would assist in keeping private landlords in the market and also attracting new ones to invest.”