According to Savills Ireland today’s PRTB figures, which show a 9.6% increase in Dublin rents over the last year, make further house price increases inevitable.

Savills Director of Research, Dr. John McCartney commented that, although Dublin house prices have risen by over 40% since the market bottomed-out in 2012, a simultaneous increase in rents has limited any decline in residential yields.  

“While deposit rates have fallen by 28% since the end of 2012, property yields have held up better due to rental growth. This relative swing has diverted money into bricks and mortar, and this will continue.”

According to Savills, investment activity will remain focused on Dublin where yields are particularly attractive;

“Normally you expect riskier, less prime assets to deliver a higher income return.  However a quirk of the current market is that average yields are higher in Dublin than elsewhere in the country. In part this reflects the fact that Dublin rents are rising so strongly.  But it also reflects the fact that prices fell more steeply in Dublin during the crash, and they still haven’t fully bounced back.”

All-else-equal McCartney says that Dublin house prices would need to rise by a minimum of 12% to restore the natural pecking order in residential yields. And, with attractive rental returns, investor demand will be a key driver of this price growth.