Shortage of rental homes leads to record increase in rents

Rents for homes were an average 14.1% higher between July and September than they were in the same three-month period last year, new figures show.

The latest rental report from daft.ie found that the availability of rental homes reached an all-time low.

The average market rent nationwide between July and September was 1,688 euro per month, up 4.3% on the second quarter of the year and 120% above the low of 765 euro per month in late 2011.

The annual inflation rate of 14.1% nationally is the highest ever recorded in the daft.ie report since its launch in 2006, with the quarter-on-quarter increase also a new series high.

The rate of inflation in Dublin was 14.3%, while in Cork city the annual change in market rents was 12.1%, in both cases higher than three months ago.

The rate of inflation in the three other principal cities – Galway, Limerick and Waterford – was higher again, ranging from 16.4% in Galway to 17.4% in Waterford.

Outside the cities, the average annual increase in market rents was 13.8%, the report showed.

The increase in market rents around the country is driven by a chronic shortage in the availability of rental accommodation.

Nationwide, there were just 1,087 homes available to rent on November 1, down one quarter on the same date a year ago and roughly quarter the average level of availability between 2015 and 2019.

The latest report also includes an index of rents paid by sitting tenants, rather than movers, using a bespoke survey of tenants.

It shows that, on average, rents paid by sitting tenants have increased by 2.5% over the last 12 months.

Since the introduction of rent pressure zones in 2016, rents of sitting tenants have increased by 17% on average, compared with an average increase in open-market rents of nearly 75% over the same period.

Ronan Lyons, associate professor of economics at Trinity College Dublin and author of the Daft Report, said: “Over the past 20 years, the best predictor of future changes in rents is the number of homes available at any particular point in time.

“As that has collapsed over the past 18 months, it was apparent that there would be significant upward pressure on rents all across the country.

“This has been confirmed in these latest figures, which show record quarterly and annual increases in market rents, despite rents already being at very high levels.

“Government policy recognised a few years ago that supply of new rental homes was critical to addressing the shortage.

“However, there are signs that the Government plans to scrap the build-to-rent planning classification.

“The BTR system had helped generate a pipeline of tens of thousands of new rental homes that are now coming on stream and represent the best hope for alleviating the chronic shortages in the rental market.

“If the BTR system is to go, policymakers must have a clear plan on how tens of thousands of new rental homes will be delivered this decade in all major towns and cities.”

Average rents, and year-on-year change, for the third quarter of this year show:

–    Dublin at 2,258 euro, up 14.3% year on year
–    Cork city at 1,708 euro, up 12.1%
–    Galway city at 1,713 euro, up 16.4%
–    Limerick city at 1,604 euro, up 17.1%
–    Waterford city at 1,357 euro, up 17.4%
–    Rest of the country at 1,318 euro, up 13.8%