Is Dublin gearing up for another property bubble?
As many returning UCD students have recently discovered to their horror, rental prices have begun to rise significantly for the first time since the carefree days of the Celtic Tiger. The pace of the rise is also rather startling; rents in the capital have risen by 7.5% on average in the 3 months from April to June alone according to the latest figures from Daft.ie. House prices in Dublin have followed in a similar vein with an average increase of over 10% in the last 12 months according to the CSO. So as many of us face increased rents, longer commutes to college or even resorting to sleeping on the couches of family and friends, the question must be asked; Is this the beginning of a new housing bubble?
We shouldn’t be jumping to conclusions just yet however. The now infamous housing bubble of the noughties was predominantly caused by the seemingly endless availability of credit. Cheap credit fueled a building and buying frenzy. This frenzy came to a shuddering halt when the Irish and world economies began to falter, resulting in a depressed housing market and broken banking system.
Nobody will now claim that the root cause of the latest increases is freely available credit. The problem is simply a lack of supply. In 2012 CSO figures show that 8,488 new housing units were built in the entire country, less than one-tenth of the albeit unsustainable peak of 2006. The lack of supply of housing to the market, coupled with a small resurgence in demand in Dublin has put upward pressure on prices. This also explains the increase in rents and the difficulty students are experiencing in securing accommodation. Figures from Daft.ie last August showed that there were less than 2,400 properties for rent in Dublin, down from over 4,200 the previous year. This does not make for comfortable reading for any students still in search of the seemingly elusive accommodation.
So while it is inaccurate to describe the recent upsurge as a bubble, until the supply to the market increases there appears to be no sign of a reprieve for renters and buyers. With a construction industry in ruins and a banking sector reluctant to lend there appears to be little prospect of that happening any time soon.