Irish Rental Report Q1 2024 | Daft.ie

Ronan Lyons, Economist

20th May 2024

Slowdown in inflation but clouds on the horizon

The figures in this latest Daft.ie Rental Report give both some good news and some fresh reasons for concern. The good news relates to the significant slowdown in inflation while the concern relates to supply pressures.

Commentaries to the last couple of Daft.ie Rental Reports have highlighted the slowdown in inflation in Dublin ‐ driven largely by fresh rental supply in what is termed (in these reports) 'Multi-Unit Rental' developments (MURs). These MURs ‐ principally located in the Greater Dublin Area ‐ have added thousands of badly needed new rental homes to the capital.

In addition, although harder to quantify, the after-effects of the move to hybrid working patterns in some sectors has also likely led to a shift in demand, out of more expensive markets (in particular in Dublin) to elsewhere in the country.

All told, open-market rents in Dublin were just 3% higher in the first quarter of 2024 than they were in the final quarter of 2022. By contrast in a number of regional rental markets, open-market rents have risen by 10% or more in the same period. For example, in Donegal market rents are 17% higher, while in Waterford (outside the city) they are 16% higher.

But while the story of 2023 was the slowdown in Dublin rental inflation, the early signs from 2024 are that something similar is happening in other markets. In Munster outside its three cities, for example, rents were effectively unchanged in 2024 Q1 compared to 2023 Q4. This is in stark contrast to the quarter-on-quarter increase of almost 4% seen in the first three months of 2023 compared to the last three months of 2022.

That large increase in 2023 Q1 has now fallen out of the year-on-year change and has been replaced by effectively no change in the latest quarter. This means that the annual rate of inflation in open-market rents in Munster, outside the cities, has almost halved since the start of the year: from over 10% in late 2023 to below 6% by March 2024.

That is one of the more dramatic examples but a modest slowdown in inflation is also evident in Connacht-Ulster while inflation in Leinster (outside Dublin) is steady.

Whether the Munster inflation slowdown is a blip or the start of a wider trend will only be seen in future reports. But, all told, the national rate of inflation in market rents ‐ at 4.9% ‐ is at its lowest rate in three years and down dramatically from the 14.1% recorded in mid-2022.

Rents Have Increased By 4.9 Percent In One Year

This represents the good news. But even then the good news is not about rents becoming more affordable, after a decade of almost uninterrupted growth. Rather it is about rents increasing at a slower rate than in recent years.

For more rents to become more affordable, there needs to be greater supply relative to demand. But while demand has grown, supply remains very tight. This is true even in Dublin, where ‐ according to the analysis in this report ‐ over 125 purpose-built rental developments opened since 2016 have added over 10,000 new rental homes.

The availability of homes to rent in Dublin had almost doubled, year-on-year, in late 2023. On October 1st last, there were almost 1,500 homes available to rent in the capital compared to just 800 on the same date a year previously.

Since then, the availability of rental homes in Dublin has fallen, rather than risen ‐ although at least some of that is seasonal. There were just over 1,200 homes available to rent in Dublin on May 1st, up only 4% year-on-year.

The Available Number Of Rental Homes In Ireland Is 1200

Outside Dublin, availability had also improved in 2023 ‐ but by proportionately far less, given the lack of new-builds outside the capital. While in autumn 2022, there were only 800 homes available to rent, excluding Dublin, a year later that had reached 1,050. A modest improvement, certainly, given the 2015-2019 average of almost 2,600, but at least stock on the market had stopped falling.

However, after 14 months of improving availability, in year-on-year terms, the number of homes available to rent outside Dublin on May 1st was marginally lower than on the same date in 2023.

The Available Number Of Rental Homes In Ireland Is 2000

Improved availability of rental homes ‐ in particular in Dublin, although not solely there ‐ from late 2022 to late 2023 ‐ led to falling inflation. Those improvements in availability now look to have finished, at least for now. This suggests, thus, that further pressure on open-market rents this year is likely to be upward, rather than downwards.