New research by Savills Ireland using CSO data shows that the Private Rented Sector has expanded strongly in recent years.
New research by Savills Ireland using CSO data shows that the Private Rented Sector has expanded strongly in recent years.
24.5% of all households in Dublin – incorporating 328,700 persons – are now living in private rented accommodation. This represents a 61.3% increase since Q1 2011. The stock of housing units in the PRS has expanded by 43,120 in Dublin since Q1 2011, and by 24,128 nationally.
This contradicts claims by some estate agents and business associations that landlords are fleeing the market and the sector is contracting.
Commenting on its new report “The Irish Private Rented Sector – Scale, Growth and Outlook” Savills Director of Research Dr. John McCartney said:
“With rents back to boom-time levels, income yields on residential property are much more attractive than the returns that are available to investors who leave their money in the bank or buy a bond. On top of this, investors are generating wealth from capital appreciation – it’s a no-brainer for people with the cash.”
While the stock of rental properties in Dublin has risen by 54% since Q1 2011 this expansion has not been sufficient to keep pace with the growth in demand:
“House price inflation, sluggish wage growth, weakened household balance sheets and tight mortgage lending have conspired to drive people who would otherwise have been owner-occupiers into the rented market. At the same time social housing tenants are increasingly being housed in private rented accommodation. This has driven a huge increase in rental demand.”
For the first time Savills’ research reveals the vacancy rate for private rented housing in Ireland. This peaked at over 10% in the middle of 2009, but has now fallen to below 1.5% - both in Dublin and outside the capital.
Rent Forecasting Model
Savills has calculated the long-term mathematical relationship between vacancy rates and rental growth. This is then used to forecast residential rents into the future. Based on three alternative vacancy rate scenarios the model predicts compound rental growth of between 22%-26% between Q3 2016 – Q4 2018.