Rents rise for first time since 2008 as mortgage fears squeeze supply
RENTS across the country have risen for the first time since 2008, as people hold back on buying properties because of a lack of mortgage finance and uncertainty about the continuing collapse in house prices.
There were increases in rents in Dublin and Cork, Louth, Kildare, Wicklow, Carlow and Kildare in November when compared with the same month last year.
A fall-off in the stock of rental properties in larger cities such as Dublin and Cork has resulted in rents rising for the first time in three years.
But the nationwide rise of 0.2pc in rents masks falls in Galway, Limerick, Waterford and most of the midlands, according to a new report from Daft.ie.
The average rent, which includes various property types, is now €825, a fall of 25pc from the peak in 2007.
Huge regional variations in rental amounts are thrown up in the survey with monthly rents as low as €458 in Longford compared with €1,050 in Dublin.
The most significant rises in rents have been in Cork with an increase of 6.2pc in the past year to an average of €883.
Daft economist Ronan Lyons said that up to now, rents had effectively been static for almost two years.
"However, differences between urban and rural areas persist, with greatest demand and smallest oversupply in Cork and Dublin, in particular," he said.
Mr Lyons said the total stock of properties on the rental market fell from 20,000 in July to 16,000 in November.
This was mainly due to a fall in property prices in Dublin, where the rental stock has fallen by almost 60pc in two years.
Another major factor was the reluctance of would-be new buyers to enter the market because of fears of further price falls and the lack of mortgage lending.
But the Daft economist warned that proposals from Social Protection Minister Joan Burton for the Budget to reduce the €465m being spent on rent allowance could have a major impact on rent levels.
Around 96,000 people receive rent supplement.
Mr Lyons said any reform of rent allowance may impact on rents.
This means that rents are likely to continue to rise in urban markets next year with decreases in rural areas.
Meanwhile, KBC Bank has tightened its rules on lending.
The bank now requires first-time buyers to have a deposit that is 20pc of the value of property being purchased.
Up to now, it would provide a mortgage if buyers had a deposit that amounted to 10pc of the value of the property.
The bank claimed it had changed its lending criteria because it wanted to act in a "prudent and sensible manner".
Last week, it said that more than 15pc of its Irish loan book of €16bn was in arrears of more than three months at the end of September.
Brokers said it was one of the few lenders active in the first-time buyer market.