(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Carol Ryan
LONDON Dec 19 (Reuters Breakingviews) - Ireland's new rent
caps just plaster over serious cracks in the walls. Dublin
housing costs have increased by over 70 percent since 2011,
ranking it among Europe's most expensive capitals for
accommodation. While the brake may stop sky-high rents
increasing further in the short term, it does little to solve a
major supply issue. That leaves the city's pitch as an
attractive EU base on shaky foundations.
Prime Minister Enda Kenny's government is introducing caps
that limit rent increases in areas of Dublin and Cork, Ireland's
second-largest city, to 4 percent annually for the next three
years. Calls from opposition parties to link rent reviews to the
consumer price index, which is currently negative in Ireland,
The intervention will spook the international investors that
have piled into the Irish property market since its 2008 crash,
lured by rent yields north of 10 percent for one-bed apartments
in some districts of Dublin. Even though the government has
tried to manage the risk of choking off crucial new supply by
exempting new developments from the cap, it sends damaging
Ireland's annual rent inflation rate stands at 12 percent,
according to property group Daft. Dublin housing is now almost
one-third more expensive than Frankfurt, 41 percent more
expensive than Brussels, and 7 percent pricier than Amsterdam,
according to cost of living index Expatistan. That makes the
city a tough sell to multinationals needing to relocate
Loosening the gummed-up supply of housing stock is tricky.
New building is at its slowest pace in 45 years, partly because
construction is expensive in Ireland and regulations stringent.
And many Irish highly-leveraged developers went to the wall
during the crash. Just 12,666 new homes were built last year,
according to Davy analysts. With the country now recording net
inward migration, double that number may be needed annually.
The issue has taken on fresh urgency as the country competes
with other European capitals to be considered a viable
post-Brexit alternative to London by financial services groups.
Some global banks have mooted moving operations out of the UK
within six months. That suggests Ireland must get to grips with
its dysfunctional housing market, and soon, lest companies
decide to head elsewhere.
- The Irish parliament on Dec. 16 passed a bill introducing
rent caps in its two main cities, Dublin and Cork.
- The measures propose restrictions on Rent Pressure Zones,
areas where annual rent increases have been at 7 percent or more
in four of the last six quarters and where rent levels are
already above the national average.
- In these zones, rent increases will be capped at 4 percent
annually for the next three years.
- The annual rate of rental inflation in Ireland is
currently 11.7 percent, according to a Daft.ie rental report,
the highest recorded since recording began in 2002.
- For previous columns by the author, Reuters customers can
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(Editing by George Hay and Sarah Hurst)