Dublin rent levels stabilising, economist says

RENT LEVELS in the Dublin housing market appear to have stabilised, economist John FitzGerald has said, in a commentary accompanying the latest figures on the subject from the Daft.ie property website.

Rents nationally rose by almost half a percentage point during the third quarter of 2010, according to the website.

The average rent nationwide now stands at €840 a month.

Rents also rose in the first quarter of the year. In October they were just 2 per cent lower than a year previously and 27 per cent below the peak, the website said.

The stabilisation in rents is being driven by urban areas that have, in some places such as south Co Dublin, seen rents increase in each of the last three quarters.

In Dublin city centre and the north city area, rents rose 0.9 per cent between July and October. Rents in Cork rose by 0.4 per cent, while rents in Galway rose 3.2 per cent in the same period, reflecting seasonal demand.

In Limerick and Waterford, there was an increase of close to 1 per cent. Outside the main cities, however, rents typically fell by 0.7 per cent, a continuation of ongoing falls in rents outside cities during 2010.

Prof FitzGerald said the first sign that the wider economy was beginning to turn would be a move towards rising rents.

As of today, it was clear that rents had stabilised, he added.

During the boom years, the formation of new households may have been suppressed by the cost of doing so, but the subsequent fall in rents has prompted more people to rent their own accommodation.

Prof FitzGerald said the latest figures indicated that in Dublin, the supply of properties to rent was equal to the flow of new households being formed and the market was in a temporary equilibrium.However, uncertainty about the economy in general made it hard to predict when the property market would recover.

“In July, when we envisaged a fiscal adjustment of €7.5 billion over the period 2011-14, I felt that such a turnaround could occur in 2012 or possibly 2013. With the doubling of the fiscal adjustment and its consequential effects in depressing domestic demand, this could be postponed until 2013-14.”

The first sign that things were beginning to turn would be a move towards rising rents, he said. This would predate any recovery in house prices and any new building.

It was far too early to predict when the market would turn. All the uncertainty about the macro-economy would continue to have serious consequences for household confidence for some time, Prof FitzGerald said.

“Households, even if they were not scared before, must be scared today.”

House prices, although falling much more slowly, still had some way to go, he added. This was suggested by the current yield on rental properties in Dublin, which was below what might be considered its equilibrium level. However, the real economy continued to develop, Prof FitzGerald said.