What’s the current situation with rental prices in Ireland?
The high cost of property leasing in Ireland, especially in metropolitan regions such as Dublin, is well-known, although recent statistics demonstrate some respite. Rents for privately owned properties marginally increased by only 0.6% on average in the first quarter of 2024, the smallest growth seen in over three years. However, this is hardly a relief for all – according to a new study by Daft.ie, the average rent in Dublin climbed to €2,395 in the early months of the year, marking a 2.5% increase compared to the same period in 2023. In Cork, the rise was a hefty 8%, amounting to €1,870 per month.
[Report on property predicts rent increases will quicken as supply of new homes dwindles]
So, what impact has this shift in market had?
The main culprit here is supply; the number of properties on offer has greatly influenced rental prices and overall inflation. According to Ronan Lyons, author of the latest Daft report, an increased supply – even at the market’s higher end – eases pressure across the board. The recent slowdown in construction of new rental properties in Dublin has significantly tamed inflation over the past year and a half.
So, is this a ray of hope for those renting properties?
Regrettably, no. The temporary relief provided by the rise in supply seems to be plateauing, and the same report forewarns of an impending hike in rents – a looming problem for those on a tight budget.
Surely, some form of rent control must be in place?
In fact, there are areas known as Rent Pressure Zones (RPZs) where strict caps on annual rent hikes are implemented, matching general inflation rates or 2% per year, whichever is less. Since their establishment in 2016, these RPZs have broadened to include almost all private rentals and are expected to remain in operation until at least the forthcoming general election.
Do these restrictions seem effective, though? They appear to have had limited impact.
The effectiveness of Rent Pressure Zones (RPZs) varies widely, depending on one’s perspective and who you consult. Advocates argue that their mere existence contributes to hindering more substantial market inflation driven by over-demand. This belief is clearly echoed by Housing Minister Darragh O’Brien, who recently sought governmental validation to extend the RPZ rules until the end of 2025.
However, it’s important to note that the burgeoning supply of rental properties, such as the proliferating build-to-rent schemes, aren’t subject to these caps when establishing their initial rent prices. This leads to these properties entering the market at a high cost. Consequently, a rental market increasingly influenced by such new supply could potentially exacerbate inflation.
Cian O’Callaghan, housing spokesman for the Social Democrats, believes there is a significant issue with the enforcement of RPZs. He points towards compelling evidence maintained by the Residential Tenancies Board (RTB), which oversees RPZs, revealing that numerous rental increases have surpassed their 2 per cent limit. In response, the RTB has announced their dedication to tackling noncompliance, maintaining that it carries out continuous investigations and enforcement procedures as are permitted under the Residential Tenancies Act.
So, with ongoing supply concerns, imperfect working of RPZs and raising property prices, what other solutions can be considered for renters? Housing lecturer Lorcan Sirr at TU Dublin argues that focusing excessively on rentals has had a negative impact on the supply of homes-for-sale and social housing markets. He suggests reducing the demand for rental properties by building more houses for sale, serving those who wish to transition from being renters to homeowners. According to his estimates, this demographic represents around 400,000 renters.