Controls have little impact as rents rise to new high, report finds
Average monthly rents are a record €1,056, up almost 10% over the last year
The annual rental inflation rate is now 9.5 per cent, well ahead of the 4 per cent rental cap on increases set in December 2016. Photograph: Bryan O’Brien
The rate of increase in rents accelerated significantly in the second half of the year, following a moderate and brief slowdown earlier in the year, a new report has shown.
The average rental price nationally is now a record €1,056, up from €965 a year earlier, according to the Residential Tenancies Board (RTB).
In Dublin city the average rent is now €1,518 compared to €1,382 in late 2016.
In the rest of the country the average is now €811, up from €743 in 2016.
The RTB’s estimation of an average rent is a calculation based on the rental costs of range of properties, from a one bed apartment up to and including a large family home.
According to the RTB the rate of increase in rental prices continued to accelerate in every part of the country after slowing slightly in the first half of 2017.
The annual rental inflation rate is now 9.5 per cent, well ahead of the 4 per cent rental cap on increases set by the Government in December 2016.
In the second quarter of 2017 the rate was 6.5 per cent.
The fastest rate of inflation was in Limerick where the average rent is growing by 19.1 per cent annually.
The report’s authors said the findings reflect the “unprecedented situation” of a continued low supply of properties.
The current rate of inflation is now the highest since 2008 at the peak of the economic boom, while the average nationwide rental-price is seven per cent higher than the previous peak in 2007.
The RTB report is based on new rental agreements. In total, 29,528 new tenancies were agreed in the third quarter of 2017, an increase of over 6,000 registrations since the last quarter.
Rents have been rising since 2012 rates accelerating rapidly in early 2014. The continued rise in the rate of inflation has raised questions about the effectiveness of the rental control policies introduced by the Government.
These measures included introducing rent pressure zones in areas of very high demand for rental properties.
Rent increases in these zones, which are in parts of Dublin, Cork, Cos Meath, Louth, Kildare, and Wicklow, are capped at 4 per cent per year over a three-year period.
RTB director Rosalind Carroll said: “This is the third Rent Index report published since rent pressure zones were introduced one year ago. Despite a moderate slowdown in the pace of growth in the first quarter of 2017, quarters two and three show that rents are continuing to trend upwards, with an increase in the pace of growth in quarter three.
“These findings reflect the unprecedented situation of continued low supply of properties and high demand in a volatile rental market.”
The RTB is a Government agency responsible for registering tenancies and dealing with disputes between tenants and landlords.
In its report, the RTB pointed out that many properties, such as properties new to the rental market, are exempt from pressure zone rules meaning it is difficult to judge how much of an impact pressure zones are having on the overall rate of inflation.
“As we suggested when the measures were introduced, the caps are having a limited effect in the current supply-constrained market,” said David McNamara, a researcher with Davy.
He said many tenants were not fully informed about pressure zone rules and added the rules are not being proactively enforced. “The onus is on the tenant to take any suspected breaches to the RTB,” he added.
The RTB does not have the powers to investigate landlords suspected of breaking the rules, but is expected to be granted those powers next year.
The problem is a lack of supply he said, noting that on November 1st there were 3,400 properties listed for rent on Daft.ie, a 16 per cent fall since last year.
The RTB urged tenants to report breaches of the rules around rental increases. “The same advice applies to tenants entering a new tenancy if they feel the rent has not been set correctly,” Ms Carroll said.
Housing and homeless charities have argued lax enforcement means some landlords are flouting the pressure zone rules and tenants are not aware of their rights. They have repeatedly called for stricter rules and penalties for errant landlords.
However, the Institute of Professional Auctioneers and Valuers (IPAV), which represents auctioneers and valuers, claimed government intervention is having a negative effect and had “panicked” the market.
IPAV chief executive Mr Davitt said rent increases are “an unfortunate consequence of rent controls without any counterbalancing to assist private landlords.”
He said the Government should instead give priority to issues that will assist supply, such as land availability and building costs.