- Jul 26, 2007
http://www.daft.ie/report/What the DAFT rental index shows is quite interesting. Having seen very substantial falls in 2008 and 2009 it would now appear that rents in Dublin have stabilised. This is apparent from the data for the last few months. It is clear from this that the supply of properties to rent is equal to the flow of new households being formed - the market is in a temporary equilibrium. This is happening in spite of the very significant outflow of people through emigration. This situation could persist for some time with stable rents. However, at some point, with the supply of properties fixed, new household formation through new renters could begin to put pressure on the market. This may not seem likely now with major fiscal retrenchment in prospect and, hence, low growth likely in 2011. However, the recovery in the tradable sector of the economy, which is clearly under way, will eventually begin to drag the rest of the economy back to growth. Then, with employment rising, incomes stabilising and prospects becoming brighter, more people will seek rental accommodation. In turn, as the excess supply dwindles rents will begin to rise. Initially such a small rise in rents will not have much impact. However, when it becomes well established it will have a number of effects. It will cause some of those renting to assess whether, in the face of rising rents, house purchase might be attractive. Eventually, as returns for those owning rented property rise and when there is some limited bounce back in house prices, there will be a gradual perception that Ireland will need some more dwellings in high demand locations.
Surely we need rent and house prices to continue falling? Both are still vastly overpriced.