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Rent Cap “Does Nothing to Address the Reason Why Prices are Rising”

Following government moves last week to cap rent increases for existing tenancies at 2 percent (or to inflation level, if it is lower), the latest Daft.ie quarterly report highlights an “unprecedented” shortage of rental homes. This month, there are just 1,460 properties listed on the website as available to rent anywhere in the country – 820 of these are in the capital. This is the lowest number of available homes listed on Daft.ie since the company started its quarterly reports, back in 2006. The shortage is particularly severe in urban areas, where rental stock is down between 70 and 80 percent, year on year. 

Also, according to the report, rent inflation has “surged’ to 6.8 percent. The average monthly asking price in Q3 was €1,516 (€2,082 in Dublin), which is more than double the 2011 average of €742.  Dublin actually saw the lowest rent inflation this year, at 2.7 percent. Inflation in the other cities was up to 11.9 percent. Having said that, rents in the capital are still 80 percent more expensive than non-city rents. This is a much wider gap than seen throughout the so-called boom years. 

While launching the report, economist Ronan Lyons called out some of the more recent government policies by stating: “Some will react to these trends with an understandable, if misplaced, search for easy solutions. A favourite is rent controls… While I can see the appeal of solving prices by simply making it illegal for prices to rise, it does nothing to address the reason why prices are rising – the lack of rental accommodation”. As usual, the topic circles back to supply, or rather, lack of supply.

Interestingly, the economist also explained that Covid-19 had “temporarily reshuffled” Ireland’s rental problems, with people availing of cheaper rents in rural areas by virtue of the opportunity to work remotely. This is an emerging trend that has yet to play out – in five years time, will employers be happy to have their teams spread across the country and beyond? Perhaps. 

On a separate note for anyone watching the Central Bank’s ongoing review of bank mortgage lending rules, Governor Gabriel Makhlouf addressed this at an ESRI event this week by stating that the review will likely continue into next year, however, he further confirmed that the Central Bank will still publish its annual decision on lending rules later this month. He specifically stated that the ongoing nature of the review “is not a signal that rules are going to be relaxed”, despite industry expectations to the contrary. This is one to keep an eye on into the New Year.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group