Ongoing affordability issues in the housing market are resulting in increasing numbers renting. This situation is exerting upward pressure on rents and now creating rental affordability issues. This raises the questions is it more affordable to buy than rent and what is an affordable rent for households? This study updates our previous study of Q3 2019.
According to the Residential Tenancies Board “the year-on-year growth rate of the national standardised average rent increased to 8.2 per cent in Q3 2019. The quarter-on-quarter growth of rent prices increased to 3.3 per cent in Q3 2019, indicating a further strengthening in the quarterly inflation. It is likely that affordability issues in the housing market are resulting in an increasing number of people moving into the rental sector, exerting upward pressure on rents.“ A significant increase in the number of properties available for both sale and rent will be required in order to temper the rapid growth in rent prices.”
Given this continued increase in rental costs, the current slowdown in the rate of housing price increase raises the attractiveness of ownership over rental – “For the first time since late 2012, the national average listed price fell for two consecutive quarters – with a 2.4% fall in Q4 following a 1.7% fall in Q3” . Determining is it really cheaper to buy than rent is important when looking to create solutions to address current housing provision issues, and, for developers when determining the target market and price level for their housing product?
This paper calculates estimated median household income levels in each county in Ireland and determines the proportion of household income available for housing costs. This proportion of household income available towards housing costs is then compared to average rents in each county to determine the affordability of renting in that county. This analysis highlights that:
From the CSO property price register (and in particular first-time buyer house price data) the cost of a 30-year mortgage to buy a median FTB home is calculated for each county. This cost is then compared with average rental cost in that County. This element of our analysis highlights that:
The issues around housing provision and housing affordability are complex and affect every family but none more so that the vulnerable people in our society – a functioning rental market needs to be in place with a range of options provided by state and private sector available for families. Options that need to be considered include a structured cost rental model using low cost loans, increased rent supplements and housing assistance payment rates in line with market rent. At the same time a balance needs to be made between the Central Bank’s safeguarding of financial stability and the ability of households to get loans costing less than current rental cost to purchase affordable homes.
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