Thursday 27 October 2016

Capital rents back to boom-time levels - so we need to build now

Published 09/06/2016 | 02:30

Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers
Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers

Confirmation that rents continue to soar as the country grapples with a housing crisis is further evidence of the need to build homes - and fast.

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Never before has there been such an imperative for the Government to kick-start the construction sector, and unless new thinking is brought to bear, households will continue to be crippled with hikes which ran to almost 9pc over the past year. This is not the Ireland of the boom years of full employment and generous salaries, yet Dublin tenants are paying more today for a home than they did at the height of the Celtic Tiger property bubble.

The figures are worth stating - it costs an average of €1,314 per month to rent a property in the capital, €3 more expensive than in 2007 where prices reached a record high. An apartment is €18 dearer.

Nationally, prices are up 8.6pc in the past 12 months. Today, the 'average' national monthly rent is €922. This compares with €849 a year ago.

But the figures only tell part of the story. That average increase equates to €73 per month, or almost €900 a year. That's a lot of money. It's not far off the average annual gas bill for a three-bedroom home. It's more than the property tax and hated water charge bill combined for most households. It's car tax. It's school uniforms. For many, it's the difference between living, and surviving.

The shortage of new homes being built - just 12,666 were completed last year - is fuelling the crisis. It is also having a societal impact, in that people are living in rented accommodation for longer.

Some 112,000 new tenancies were registered in 2013. That has since fallen every year since, as the number of people in rented accommodation has grown.

The Residential Tenancies Board (RTB) Rent Index, published today, shows that rents have risen for the 12th quarter in a row as the shortage of new homes coming on stream fuels price increases.

While the rate of increase is slowing, that's of little comfort. Rents rose 0.5pc between the first three months of this year (Q1) and the last three months (Q4) of 2015. The cost of renting a house has dropped slightly quarter-on-quarter, down 0.3pc. But apartment rents are up 1.8pc.

The data is compiled by the Economic and Social Research Institute for the RTB.

It also shows that across the country as a whole, house rents rose 7.8pc year-on-year to €900, an increase of €65 per month. Apartments are up 9.8pc to €972, up €87 per month. In Dublin, rents are up 8.7pc overall, with houses up 8.4pc and apartments up 8.1pc. A house costs an average of €1,454 and an apartment €1,306.

Outside of Dublin, rents rose by 8.8pc year-on-year. The average monthly rent for a house is up 7.6pc to €731, while an apartment costs €711, up 11.3pc.

Rents reached a peak at the end of 2007 when the national average stood at €1,013. They fell to their lowest level at the start of 2012, down to €758. The recovery, if it can be called that, means rents are now 0.2pc above the 2007 peak. Outside the capital, they are down 13.9pc.

The Institute of Professional Auctioneers and Valuers suggests there is a "confluence of factors" which is resulting in soaring rents.

"Amid increasing demand from a growing population in a growing economy, we are at the same time experiencing the outcome of almost a decade when building of both public and private housing had stalled," CEO Pat Davitt said. "There is but one answer and that is to build - build investment, build up and build rapidly."

Some 324,000 tenancies are registered with the RTB.

Irish Independent

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