Cost of rent stops rising as supply doubles
Cost of rent stops rising as supply doubles By Edel Kennedy Wednesday February 13 2008 THE number of rental properties available across the country has almost doubled in just one year. It highlights the increasing pressure on the property market and signals how some are struggling to service their mortgage debts. The survey, by property website Daft.ie, shows that it has directly resulted in a stagnation of rental prices for the first time in four years. The survey of rents in the last quarter of 2007 shows that the average rent nationwide remains unchanged at €1,388. Dan O'Brien, economist with the Economist Intelligence Unit, said there was a 90pc surge in advertised rental properties across 2007, with 50pc of the jump in the final quarter. "Although demand for rental properties is likely to have expanded too, it will not have matched the doubling in supply," he said. "The inevitable result is to be seen in rents. The strong increases in the past couple of years are slowing sharply." He said the sudden surge in supply can be traced directly back to an increase in base interest rate which increased from a historic low of 2pc to 4pc. "The most likely explanation is those who had invested in property but had not sought a rental income are now doing so," said Mr O'Brien. "As interest rates rose, so did the debt-servicing costs, while at the same time capital gain evaporated as prices stopped rising. Those who had been willing to forego rental yield are less and less willing to do so." Other findings show: - The gap between rents in South Dublin city and North Dublin city -- the 'Southside premium' -- has doubled in just over two years and is now €220 -- Cork city suburbs have seen the biggest increase in rent-a-room income over 2007 -- up more than 10pc over the past 12 months. - Dublin city centre properties generate an average of €664 a month for the rent-a-room scheme. - Outside the urban centres rents are static. - Nationwide the average yield for rental property is 3.2pc, still below the cost of borrowing. Ronan Lyons, economist with the website, said that overall demand remains strong. "We do not foresee any major weaknesses while immigration remains at current levels," he added. - Edel Kennedy