This morning Ireland’s Central Statistics Office (CSO) has released its inflation figures for May 2012. The monthly headline Consumer Price Index (CPI) fell by 0.2% compared to April and March 2012, but is up 1.7% year-on-year (which continues a downward trend seen in recent months and the 2%+ that pertained in January 2011). Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 7.1% in the past year as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for nearly 6% of the basket which measures inflation, the impact on inflation was substantial.
Energy costs in homes, which account for 5% of the total basket examined by the CSO, have risen by 10.3% in the past 12 months, the same annual increase as pertained in March, April and May. Natural gas continues to rocket with prices up 22.5% annually. This should be a cause for concern.
Elsewhere private rents fell by 0.5% in June 2012 – the third monthly decline in 2012 and the first time since before 2010 that there have been three consecutive monthly declines – but over the past year, such rents are up by 2.0% according to the CSO – there is some small rounding in the figures above which show 2.1%.
It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 3.5% increase (mostly recorded in February and October 2011 and February 2012).
At the start of January 2012, the Department of Social Protection reduced its rent assistance payments by up to 29% (an average of 13%) and the Department says that some 40% of the rented market in the State is affected by rent assistance payments, which at the end of 2011, was paid to 98,603 households. The Department’s 40% is derived from information provided to it by the Private Residential Tenancies Board. The Department is projecting it will save €55m in 2012 from its €500m budget for rent assistance, the saving comprising €33m to changes to the minimum contribution and €22m in relation to the new maximum limits. The decline in April, May and June 2012, when three month notices given in January 2012 would have expired may herald the start of the long awaited impact of the reductions in rent assistance announced in January 2012.
Private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants. The betting on here is that private rents will come under pressure in the short term. Property commentators including those in NAMA have pointed to a buoyant rental market as one of the bright spots in an otherwise dismal property market, but that buoyancy may deflate in coming months as the artificial supports of State-aided rent assistance dissipates.
Hi NWL
“Private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants.” Yes but you did say earlier that 40% of rents are affected by rent assistance payments so a sizable minority do. And if 40 % of the market faces downward pressure that will be enough to bring rent down overall and even have an effect on the rest of the market too.
That’s why I don’t understand the far lefts objection to lowering of rent assistance. Some eggs will be broken along the way but it will lead to less tax payer money in the hands of rent seekers and renters paying less over all and downward pressure on house prices. They should be campaigning for intermediaries to be hired by government (local authorities) to negotiate on behalf of renters who have the power to keep rates at current rates in circumstances where no reduction is possible but would be paid a commission every time they successfully reduced the required outlay of the state. You would also need an inspector to approve new accommodation is of equal standard to the previous accommodation to ensure those on commission do not leave tenants worse off.
Good news for Joan. IF this trend continues, a further chop to rent allowance will be easily justified come December.
The difficulty here is that I have seen a number of cases where the landlords have refused to accept the reduced rent. Tenants are not allowed to themselves supplement rent payments above the maximum threshold. As a result of this many are paying “under the table” supplements, as there is no suitable alternative properties available within the threshold rent. I have heard of enough similar cases to indicate that this arrangement is now quite prevelant. Particulatly amongst elderly people, who don’t have the flexibility of being able to easily move accomodation.
At some point private rents will have rise as various charges begin to bite.
House insurance, due to adverse weather i.e. flooding this will rise as insurance companies recoup their losses.
PRTB registration charge, was at 70e / registration now at 90e / registration, no doubt this will increase to 100e / registration fairly soon. Oh by the way if the registration is late by one month a charge of 180 euro is levied.
The household charge of 100e / annum, no doubt this will increase, I would expect this to be around 400e / annum for 2013.
NPPR tax, currently at 200e, might be increased for 2013, but this cannot be offset against profit.
With falling standards in society, repairs for wear and tear on fittings / furniture will become more expensive for the landlord.
The only bright side is low ECB rates, but that only applies for those on tracker mortgages.
I am wondering when the first rise will occur, as landlords will not be able to hold off forever.
Can confirm 44 Brendan’s report of “under the the table” rent supplement payments in Dublin. I know of a number of them. Have not heard the same in rural areas.