This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for March 2013. The monthly headline Consumer Price Index (CPI) increased by 0.4% compared to February 2013, and is still only up a modest 0.5% year-on-year. March’s results mirror those of December, November, October and September, and continue a subdued annual inflation trend seen in recent months compared with the 2%+ that pertained before January 2011.
Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 7.0% 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 over 5% of the basket which measures inflation, the impact on inflation was substantial.
Energy costs in homes on the other hand, which account for over 5% of the total basket examined by the CSO, have risen by 5.4% 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 a stonking 1.0% in the month of March 2013 – this after modest increases in February and January but bigger increases in previous months: 0.7% in December, 0.6% in November, 0.7% in October and 0.9% in September 2012. Over the past year, such rents are up by 2.9% according to the CSO – there is some small rounding in the figures above which show 3.4%.
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 8.3% increase (mostly recorded in February and October 2011 and February and September/October/November 2012 and March 2013).
Rent assistance levels have not been affected by the recent Budget 2013, neither the rates nor contribution have changed.
NAMA Wine Lake 
One really has to wonder if the rent increases are sustainable. Wages falling, taxes increasing, and get rents keep going up.
@Stephen, it’s a tug of war between landlords and tenants. Ireland doesn’t have enough large-scale landlords to have cartel pricing, but landlords face actual cost pressures and perhaps just as importantly, the elimination of underlying increases in the property which hitherto subsidised rents. And on the other side of the rope, you have factors such as you describe and you could add vacant property (in some areas), falling populations in some areas and stricter cost control when granting rent assistance.
As mentioned by many property experts… there is the YIELD ratio. What they mean is the cost of the property to the annual rental income.
For example…. a property costing 165 K… renting for 800e a month, gives an annual yield of 5.8% approximately.
This of course is a extremely crude method of judging a property’s value, because it ignores the cost of holding the property.
For example, if I bought a property for 1 euro, and I rented it for 1 euro per year, my yield would be 100%. A great return. However if the annual cost to the landlord of holding the property is 2 euro / year, does it look like a good investment now?
Obviously not.
Property porn experts fail to mention the ratio of annual rental income to the cost of holding the property excluding mortgage costs. I reckon some apartments in Dublin must be getting close to 3500 euro / year just to rent out, and that’s not including water charges or the soon to be mandatory TV license fee ( which once made mandatory will rise exponentially in cost).
For a landlord… rents less than 800e / month are almost not worth it, due to costs heavily eating into the annual income.
After property costs have been deducted from the annual rental income, What little there is left is now subjected to income tax.
So to sum up… there are two important yields to remember with property.
1) The buying price to annual income ratio.
2) The property management costs to annual income ratio.
Both are vitally important, yet many property experts consistently ignore the second point.
Below a certain rental threshold, the costs associated with being a landlord greatly outweigh the benefits.
This of course puts pressure on Landlords, which of course gets transferred onto Tenants, which puts pressure on employers, which puts pressure on the Cost of Competitiveness for the country.
Whole country swimming in houses, wages are down, 50,000+ people emigrating per annum, taxes increasing, and residential rents are going up?
They are going up, because priority number one of government is to protect landlord and landlord incomes, with the excuse that this is to protect the banks.
Other priorities come a very poor second to landlords. You may ask why.
Cui bono.
TD’s and the political allies probably contain the largest proportion of landlords than any other work group.
The salaries and expenses are obviously not enough for TDs.
The country has to be destroyed to keep up their rental incomes up as well.
Its all about affordability.If rents go up (which they are) and wages don’t go up (which they won’t) well something happens.Nett result is another crash and this time in the rental /landlord area.Will we ever learn!!!!
There are currently 1/2 the number of properties to rent in my town as there was this time last year. Supply is being severely restricted by lots of government bodies and banks as joseph ryan explained above. The question is how long can Nama and all the rest get away with it?
Frank Daly last year said he was going to kick some tires to get the housing market going. Outside South Dublin it hasn’t happened.
Nama are looking at making huge losses and they know it.
The only question I have is how much longer can they keep the show on the road?
It would appear that if the CSO numbers are correct that this is one area of the domestic economy which isn’t contracting.