Over the past decade, Ireland’s rental market has been gripped by a chronic dilemma: dwindling availability and escalating rents. However, a new report by DAFT provides a glimmer of hope for those worried about the market’s trajectory. Property economist, Ronan Lyons, points out key data trends and analysis that uncover the current predicament and potential solutions.
The Dublin housing scene felt the COVID-19 pandemic’s effects, with a sudden slump in rental demand. However, with the reopening of society in 2021, demand surged beyond expectations. Open-market rents, fuelled by intense demand and amplified by the influx of Ukrainian refugees, rose by almost 3% per quarter in 2021 and 2022, signalling a severe imbalance between demand and dwindling supply.
A clear understanding of the existing rental stock’s transformation over the recent years remains elusive due to the transition to new digital systems and annual registrations. Despite this temporary hurdle, Lyons expresses confidence that we will soon be equipped to assess the rental home stock more effectively.
What we do know is that nearly 5,350 landlords decided to sell their properties in the second half of 2022, most likely removing these from the rental segment due to a thriving sales market and scarcity of buy-to-let mortgages. Another 1,500 properties are set to be converted into owner-occupied dwellings, which, along with some under renovation and others changed in use, could lead to the rental sector losing approximately 7,000 homes in six months.
In contrast, new developments in Dublin, the city that accounts for around 40% of the rental market, have seen the number of registered tenancies double in five months from 1,270 to almost 2,600. Yet, even at the fastest rate in two decades, it seems unlikely that the introduction of these new rentals can compensate for the losses.
The harsh reality is that while Dublin may have added about 3,000 new rental homes, it likely lost an equal number. The rest of the country saw a net loss of about 4,000 rental homes. Essentially, Dublin’s market is barely keeping its head above water, and the rest of the country is sinking.
Government policy from 2018 to 2021 aimed at augmenting the rental market’s inventory. This policy shift came after a regulation in 2015 on rent control within and between tenancies. While within-tenancy rent control is common globally, across-tenancy rent control could potentially harm the supply of rental homes. This control, coupled with other rental regulations, appears to have precipitated the predicted decrease in rental home supply.
In response to the chronic issue, government policy has understandably moved from encouraging new entries to preventing exits from the rental market. While this strategy addresses the immediate problem, it does not offer a long-term solution. Preventing property owners from selling their properties merely delays the inevitable.
The sustainable solution requires a return to a policy of encouraging new entries into the rental market. This necessitates planning and zoning reforms, targeted reductions in construction costs, and most importantly, time. The only way to reverse the damage inflicted over the past decade is to consistently increase the stock of rental homes over the next 10-15 years. As per the DAFT report, it’s time to keep the tap turned on and allow the flow of new entries into the rental market.