Is increase in rental supply a blip or the start of a trend?

The slow increase in rental supply evident over the past year or so has continued in the most recent quarter, according to the latest quarterly figures from Daft.ie, with properties for rent rising to about 1,800. This is well above the 716 reported in August 2022, the lowest supply level reached after the post-Covid bounce back.

However, in a properly functioning market the size of Ireland’s, the report’s author, Ronan Lyons of Trinity College Dublin, notes that close to 6,000 homes would be available to rent.

The picture varies significantly across the country. The vast bulk of the supply increase has been in Dublin, where the cost of new rentals is just 1.3 per cent above its levels at the start of the year. By contrast, in Connacht and Munster, where the increase in supply has been minimal, rents increased by 13 and 10 per cent, respectively, over the same time period. As Lyons notes, more supply – in any part of the market – has an impact.

What we don’t know is the nature of the new supply being delivered and the split between institutional investors, private landlords and property developed by approved housing bodies and local authorities.

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The increase in supply comes against expectations that higher costs and rising interest rates would cause a viability gap for developers, despite high rents. It is also despite the overall drop in private landlord tenancies, at least up to earlier this year.

The key issue for the Government is whether this is now trend or a “dead-cat bounce” in supply. The extent of cash being pushed into the market by the Government to support developers and recent housing completion figures suggest that there is some life in the market.

Whether this can be turned into a trend remains to be seen. Housing minister Darragh O’Brien is claiming progress, while Sinn Féin has renewed its offensive, calling inter alia for a freezing of rental levels. What happens next will frame a lot of the debate in the run-up to the next general election.