The RTB/ESRI Report produced by the Residential Tenancies Board (RTB) and the Economic and Social Research Institute (ESRI) provides rental indicators (the Rent Index) generated to track price developments in the Irish market.
According to the research, it is likely that affordability issues in the housing market are resulting in an increasing number of people moving into the rental sector, exerting upward pressure on rents.
With the economy operating close to full employment, this is likely aggravating affordability while the risks from the international environment are increasing due to continued Brexit uncertainty. If a no-deal Brexit occurs in late 2019, the Irish economy could contract in 2020.
The year-on-year growth rate of the national standardised average rent slowed marginally to 7.0 per cent in Q2 2019. The quarter-on-quarter growth of rent prices increased to 3.0 per cent in Q2 2019, indicating a strengthening in the quarterly inflation.
The RTB confirms that the standardised average national rent for houses stood at €1,164 in Q2 2019 which was an increase of €79 compared to Q2 2018. The standardised average rent for apartments also increased over this period, up by €71 to €1,252 in Q2 2019. On a quarterly basis, the standardised national rent for both houses and apartments increased compared to Q1 2019. The growth rate for houses increased to 3.6 per cent in Q2 2019, up from 1.1 per cent in the previous quarter. The quarter-on-quarter growth rate for apartments remained the same as the previous quarter at 2.1 per cent. On a year-on-year basis, rents for houses increased by 7.3 per cent in Q2 2019, 0.1 percentage points lower than the annual growth rate in Q1 2019. Apartment rent prices increased by 6.0 per cent in Q2 2019 over the same period which represents a decrease of 1.8 percentage points relative to Q1 2019.
Most of the renters concentrate in the large population centres near jobs, education and amenities, price pressures are greatest in these areas. As Dublin accounts for the largest share of economic activity and employment, in Q2 2019, it accounted for more than 2 in every 5 tenancies that were registered with the RTB. The standardised average rent for Dublin stood at €1,713, up from €1,599 in the same quarter the previous year. This represents a 7.1 per cent annual increase in rent in the capital.
The counties outside the GDA show the standardised average rent stood at €861 in Q2 2019, up from €799 the previous year. The Index for the rest of the country stood at 112 in Q2 2019, an increase of 3 index points in comparison to Q1 2019. The quarter-on-quarter growth rate for outside the GDA was 2.2 per cent in Q2 2019. On a year-on-year basis, rents outside the GDA were up by 7.7 per cent.
Research commissioned by the Residential Tenancies Board (RTB) shows that Rent Pressure Zones (RPZs) have only had a moderating effect on the sector. With 65% of tenancies in Rent Pressure Zones the ESRI research indicates that price inflation in RPZs has fallen from just over 9% for the seven quarters before the regulations to just under 6.4% in the seven quarters since the introduction of the legislation in December 2016. In the non-RPZ areas, the average rent growth before and after the policy was virtually the same, with only a 0.24% decline.
As the housing market, including the PRS, is influenced by the state of the economy, interest rates, real income, changes in population size and investor incentives, house prices and rents are largely determined by the available supply. Ongoing supply shortages are a factor in continued rent price growth despite the construction industry seeing a rapid recovery.
A significant increase in the number of properties available for sale and rent, is necessary, to temper the rapid and continued growth in rent prices.