Last Thursday, the day after Leaving Cert results came out, the latest Daft Rental Report was released. The full report including a commentary by Gary Redmond, President of USI, is available over on daft, but to me, there were five interesting things that came out of the report:
- Accommodation costs for new and returning students vary significantly across the country. Page 5 of the report outlines the current costs faced by students in the markets close to all major universities and ITs. A double room ranges in cost from €500 a month in Dublin city centre to €220 a month in Letterkenny. Similarly a three-bed house in Dublin city centre costs €1,500 a month compared to €600 a month or less outside the major cities.
- There is plenty of good news for landlords, as rents barely budged in the second quarter of the year. The average rent in the second quarter was just 0.9% lower than in the first quarter, making it the second period in a row of essentially stable rents. A year previously, the equivalent figure had been 5.4%, so assuming no “double dip”, the rental market is close to stabilisation.
- In a healthy market, the quarter on quarter change is less relevant than the annual change, because of seasonal ups and downs (and because people tend to rent in 12 month installments). Since late 2007, it’s been all one-way though, hence the focus on quarter-on-quarter recently. But recent stabilisation means we can start looking at the year-on-year change in rents again – at -7%, rents are definitely still be reviewed when renewed but it’s the slowest rate of falls in rents since late 2008.
- This review of rents is most definitely good news for students, because it’s the third year in a row that students start their hunt for accommodation knowing rents are lower than the previous year. Those who will appreciate this best are those who rented in the 2007/08 academic year. Over the course of the coming academic year, students around the country could save between €1,500 and €4,000, compared with 2007/08 costs.
- Due to oversupply, however, the rental market remains fragile. Ultimately the rental market – like any – is about supply and demand. Supply remains high – 20,000 units were available to rent across the country on August 1. I don’t believe for a minute that this has to return to pre-2007 levels (5,000) for the market to stabilise. But if rents are to stabilise – and this is the first part of a return to normality for house prices too, remember – supply and demand have to balance. Currently, the market is processing around 14,000 units a month. This suggests there’s still an overhang but where this oversupply is may be mismatched compared to where demand is. In Dublin, for example, the 6,000 units available to rent is very close to monthly demand but in other parts, the gap is much bigger.
Over on Manyeyes, I’ve mapped the change in rents over the last three years at a county level. I’ve also put in a live visualisation below. Give it a try if you can – for example, by clicking two maps (not one) and choosing to align map scales, you can map 2007 and 2010 rents by county. You’ll see, for example, that rents in Dublin’s most expensive commuter county, Wicklow, are now below what they were in Dublin’s cheapest commuter county, Louth, in 2007:
Another thing to check out in the visualisation is the fall in rents. Even using percentages rather than euro amounts, urban areas (specifically Cork and the greater Dublin area) still look to have fallen the most. Given that these were the most expensive areas, it could very well be the case that “the bigger they are, the harder they fall”.
However, there is an alternative explanation. The greater reduction in these areas has coincided with a better matching of supply and demand. It might just be the case that the larger rental markets (in volume terms) have been able to find a new sustainable level of rents faster.
The next 12 months will probably tell us which of these explanations is more correct. If it does, it may have significant implications for what our expectations should be about prices in the sales segment, where a similar pattern is emerging.