This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for October 2012. The monthly headline Consumer Price Index (CPI) fell by 0.1% compared to September 2012, and is up 1.2% year-on-year. October’s results mirror those of September and continue a subdued trend seen in recent months compared with the 2%+ that pertained before January 2011. If this low rate of annual inflation continues and if our real GDP does in fact grow by 0.4% as forecast by the European Commission yesterday, and if the €14bn year-to-date deficit recorded in the October 2012 Exchequer Statement worsens, then Ireland may miss the 8.6% deficit:GDP target as set out in the Memorandum of Understanding with the so-called bailout Troika, which may herald intensified austerity with bigger budget adjustments.
Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 18.1% 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 on the other hand, which account for 5% of the total basket examined by the CSO, have risen by 9.1% in the past 12 months, mostly driven by the 9% price hikes at the ESB, and in October 2012 at Bord Gais.
Elsewhere, private rents rose by 0.7% in the month of October 2012 – this after a 0.9% increase in September 2012, a flat month in August and three months of declines in April-June followed by a small increase in July – and over the past year, such rents are up by 1.5% according to the CSO – there is some small rounding in the figures above which show 1.7%.
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 5.5% increase (mostly recorded in February and October 2011 and February and September/October 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, but the Department seems to have conceded recently that the figure may be lower in the order of 30%.
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 prospect of further cuts to rent assistance in the forthcoming Budget 2013 to be announced in December 2012, is very real, this despite the report by Focus Ireland this week which highlighted the accommodation difficulties caused by the reductions in rent limits and increases in contribution.
In the past, private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants. The September and October 2012 increases are surprising against pressures from socially assisted reductions. 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. The results from the CSO this morning echo those of DAFT.ie which yesterday published a quarterly report showing 0.7% increases nationally but near 3% per annum increases in Dublin.
Hi NWL
I think I heard on TV3 that the amount of premisis available for rent had decreased a lot (I think they said 70% but that cant be right?)
Is there evidence that the availability of private rented accommodation is shrinking?
Isn’t this unexpected rent increase the perfet time for nama to start renting our property under their control that is ready for rent and getting some rent role in for the state?
There are loads of finished NAMA units in Sandyford that are lying idle even though demand and prices are increasing.
Couples still want to live together and form families.They may not be able to save the deposit or get a mortgage but they can pay rrent and landlords always take advantage .Why do you think there are so many cash sales @auction?Landlords always take advantages!
I agree with eamonn-but Nama will end up losing money on the deal because someones connection will get the job and charge a packet
I know from keeping my eye on the Dublin rental market that many agents have extra properties that they don’t advertise, but are available on inquiry. I suspect that they are only putting up a percentage of what they have so as to restrict supply. Iv seen properties up on daft that then disappear and when you call up the agents they are still available. I suspect they are all doing this in agreement, which if true would be a cartel, which I believe is illegal. Does anyone know which organ of the state would be responsible for investigating this?
I completely agree with Eamonn about all the finished nama units that are not being released. Does anyone (nml?) know how many finished housing units nama are keeping from the rental market? I suspect they are complicate with the big agents as their interests are aligned, but then again, maybe my tinfoil hat is coming loose….
I am one of the people who went into the rental market in October and for 2 months i had to fight for an apartment in the location i wanted! D7, D6 or D8! (which is pretty big) and most of the properties i viewed there was 5 or 6 people waiting at the place also! Its getting busy in the rental market it is not a cartel as Conor says above!
@Conor …I’m an agent & truthfully haven’t ever heard of an agent restricting supply (save if you had say a large number of empty units in one block you might not release all on one day from an administration perspective) we get paid when we let property, sooner we let,sooner we get paid. I leave an ad up on say daft.ie until the lease is signed, so often I would receive enquiries during the final stages of negotiations, by which time it may be just about gone. The resi rental market is very active at the moment and there is a great deal of interest in well located, good quality residential property.