This afternoon, Minister for Housing, Planning and Local Government, Eoghan Murphy TD, published the Residential Tenancies Board (RTB) Quarterly Rent Index Report for Q2 2017. This Report is the second of its type to be released since the introduction of Rent Pressure Zones and the correlative rent controls.
Pursuant to the defined function of the RTB in the Residential Tenancies Act (2004), the RTB publishes this Report, which is “the most accurate and authoritative rent report of its kind on the private accommodation sector in Ireland”.[i]
The Report is compiled by the Economic and Social Research Institute (ESRI) using data from the RTB’s register of tenancies. The results are displayed using software from the Central Statistics Office (CSO). Once compiled, the Report enters a peer-review process in the ESRI and the Department of Housing, Planning and Local Government. Data is extracted approximately five weeks following the end of a quarter, to ensure the highest level of data accuracy. The compilation is done on the basis of Hedonic Regression[ii].
Reports undertaken before Q1 2017 used three areas of classifications: national, Dublin area, and area outside Dublin. However, with the year’s first Report came a new method. Recent legislative changes have made it possible for the RTB to examine more granular regional tenancy data, based on Local Electoral Areas (LEA).
On average, the RTB register around 100,000 new tenancies annually, with a large proportion of these during the September/October period.
Q2, compared to Q1
In Q1 2017, the RTB had 337,306 active tenancies, of which 23,866 were registered during that period. In Q2, over 19,000 tenancies were registered.
In Q1 2017, national rents grew at 7.37% annually. This held steady from Q4 2016. In Q2, this decreased to 6.6% growth annually.
The total standardised average national rent stood at €987 per month is Q1. In Q2, this increased to €1,017 – a jump of €30 over Q1 2017’s figure, and €63 above Q2 2016.
In Q1, 45 LEAs in six counties had rents above the national level. They were: Dublin, Cork, Galway, Wicklow, Meath and Kildare. Q2 figures include two new LEA areas that can be classified “rent pressure zones”: Drogheda and Greystones. These areas will now be subject to controls on rent increases, which will be limited to a maximum of 4% per annum.
In Q1, Dublin rents, in particular, were notably high. They were 8% above their previous peak in Q4 of 2007. Rent prices for apartments in Dublin were 10.5% higher than their 2007 levels. In Q1, rentals in Dublin made up 38% of all tenancies. In Q2, this figure was 37.7%, a marginal decrease. The increased demand for rental properties in Dublin is evident in the Q2 figures, which show that Dublin overall rents in Q2 were 10.8% above their previous peak in Q4 2007; apartment rentals prices in Dublin were 14.7% higher than the 2007 peak.
This was echoed by the RTB’s Director, Rosalind Carroll, who commented:
“The findings for the second quarter of this year are a further reflection of the ongoing pressure in the rental sector as demand continues to outstrip supply.”
You can view the Q1 Report here.
You can view the latest data on the Q2 Report here.
Areas for Policy change
With policy changes such as those introducing Rent Pressure Zones classification, it can often take some time for changes to bed down and for these changes to be seen in the data. Both Minister Murphy TD and Ms Carroll noted that not enough time has passed to really track patterns in the effectiveness of the Rent Pressure Zone controls.
Minister Murphy TD also addressed the “Substantial Refurbishment” exemption that allows landlords to avoid the 4% per annum restriction. He said,
“I am instructing my Department and the RTB to formulate a definition of what constitutes ‘Substantial Refurbishment’ of a dwelling that will issue from the RTB as guidance. This clarification will be communicated to landlords in the coming weeks by the RTB”.[iii]
The role of the RTB may also, on the foot of this Report, be expanded to taking on the regulatory responsibility for the rental sector. The Minister noted that, at present, they are “exploring the changes needed in legislation and in the Board’s financing arrangements” to make this happen.
Due to a legislative anomaly, where landlords who bought rental properties through mortgaging and have fallen into significant arrears and where these properties go into receivership, receivers do not legally have to abide by regulations as they are not legally landlords. The Minister said,
“A working group, established by my Department to examine the feasibility of amending legislation to ensure that tenants’ rights are protected during receivership”.
A forthcoming Mortgage to Rent scheme will also be outlined within the next fortnight.
[ii] “Hedonic Regression, in economics, is a method of estimating demand or prices. It is based on the hypothesis that products can be treated as bundles of characteristics and that prices can be attached to each characteristic. For the Rental Index, the characteristics include dwelling size, type, and location amongst others.” Via RTB website, available here.
[iii] Minister’s speech at Ploughing Championship in Tullamore, 19 September 2017.