After falling by 25% since the Celtic Tiger peak in early 2008, residential property rents are on the rise again and could go up as much as 14% by 2013, according to property consultants Savills Ireland.
Ronan O’Driscoll, Director of Residential at Savills Ireland said that, despite a significant increase in the supply of rental accommodation into Ireland’s rental pool over the past ten years, when over 150,000 additional properties were supplied to the rental market, shortages are now evident in the main cities.
“Typical rents in Dublin, for a 2-bedroom apartment, vary between €900 and €1,200 per month, with €1,100 being the average. We predict that this will increase by 10% in the next two years in the more popular residential areas. There is a particular shortage of houses in the rental market, and an average 3-bedroom house in a suburban location in Dublin is currently achieving €1,400 per month. We predict this will increase to €1600 per month in the next two years (14%)”.
Catherine McAuliffe, Director of Residential in Savills Cork added that Cork rents are commanding approximately €600 – €900 for a one bed apartment and up to €1,800 for a three-bed flat.
“A standard suburban 3-bed semi detached in Douglas, Blackrock or Bishopstown would achieve around €1,000 per month. There is actually a shortage of 4-bed detached houses for rent with rents likely to be in the region €1300 – €2000 per month,” she said.
Savills believe that with mortgage lending at an all-time low, people are struggling to secure mortgage finance. Even couples with good jobs find it difficult to secure a suitable mortgage in many cases, so renting is their only alternative.
“We are seeing a shift back in time where now for young couples starting a home, the norm is to rent, rather than to buy a property. However, during the boom many twenty somethings went straight from their parents’ home to owning their own home. Property values are already beginning to bottom out in many locations, and although people are recognising the value in the housing market many cannot secure the finance to buy.
“They will therefore continue to rent in the medium term until the supply of mortgage finance improves. The two are inter-related and when mortgage finance begins to improve again, there will be a move back to purchasing,” said Mr O’Driscoll.
Mortgage lending is expected to increase next year with Bank of Ireland pledging €1.5 billion in funding on the back of incentives announced in Tuesday’s Budget.