Tenants warned of ‘substantial increase’ in rents next year

Residential rents continued to rise last month and tenants are in for "a substantial increase" in rental costs when their two-year price freeze expires, according to Goodbody.

New inflation figures published by the Central Statistics Office (CSO) on Thursday show private rents rose 0.7 per cent in August compared with July, the 50th consecutive month of gains.

The annual rate of growth stood at 8.8 per cent in August, having remained in a very tight range of between 8 per cent and 11 per cent for the last three years.

An analysis of the CSO figures by Goodbody chief economist Dermot O’Leary finds the cumulative increase in private-sector rents now stands at 46 per cent, compared with a 5 per cent increase in consumer prices overall.

Rental yields

Mr O’Leary said rental yields had risen from 5.5 per cent to 5.7 per cent over the last 12 months, as against an 8 per cent rise in house prices.

“From an investment point of view, this remains an attractive yield,” he said.

However, while the latest figures may be welcomed by investors, it’s further bad news for tenants, who are already suffering from the double whammy of rising rents and a lack of availability.

Legislation limiting rent increases to every two years came into force last November. However, critics say this has done little to take the heat out of the rental market.

“Coming to the one-year anniversary of the government-imposed rental freeze, it is clear that the underlying upward pressure on rents remains, thus tenants are in for a substantial increase when their two-year freeze expires,” said Mr O’Leary.

A Daft.ie report published last month showed rents reached their highest level on record during the second quarter and are nearly 10 per cent higher than they were a year ago. At the same time, the number of properties available to rent continued to decline, with a little over 3,600 available across the country on August 1st. Of those, just 1,100 were in Dublin.

“With available properties to rent remaining at exceptionally low levels, further rent increases are likely,” said Mr O’Leary.