This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for November 2012. The monthly headline Consumer Price Index (CPI) fell by 0.4% compared to October 2012, and is up just 0.8% year-on-year. November’s results mirror those ofOctober and 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 is representative of the components of GDP and if our real GDP does in fact grow by 0.4% as forecast by the European Commission in October 2012, and if the €13bn year-to-date deficit recorded in the November 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. The Budget 2013 forecasts indicated Ireland would conclude the year with an 8.2% deficit, but evidence countering this low figure mounts.
Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 17.1% 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 8% 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 0.6% in the month of November 2012 – this after a 0.7% monthly increase in October 2012 and 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 1.8% 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 6.1% increase (mostly recorded in February and October 2011 and February and September/October/November 2012).
Rent assistance levels have not been affected by the recent Budget 2013, neither the rates nor contribution have changed.
NAMA Wine Lake 
You drawing any conclusion on the effect of housing benefit reductions on private rents?
This is a “no brainer”. Just the law of supply and demand in action. Many remain unwilling or unable to buy a home.
The 20- to 34-year-olds who haven’t emigrated due the employment situation, are spurring demand for rental accommodation. Many of those younger people, however, cannot come up with the tens of thousands of euros needed for down payments, turning them into renters.
Such a situation makes it easier for landlords to raise rents. So, the insolvency of the banks and their inability to lend combined with the perception that there are further falls still to come in the residential home purchase market all feeds demand for rental accommodation. You don’t have to be an economist to figure it out….. but the politicians never will.