Rents are on the rise again and certain developments in the coming weeks could finally mark the bottoming out of the new-homes market

THE CREDIT crisis and uncertainty about the recovery in the residential market have combined to give a positive spin to the rental sector in Dublin city and some of the suburbs. The steady improvement in rents and lettings over the past few weeks have helped many investors recover lost ground and left key areas of the city centre and south Dublin with a shortage of rental properties.

All this is in sharp contrast to the opening months of the year when sentiment was at an all-time low and investors had to drop rents by at least 20 per cent to hold on to tenants. Despite all the reassurances from the lending institutions that they are making mortgages available to first-time buyers, the number of sales going through is still relatively small.

This is partly due to the fact only those who can meet a strict criteria are getting loan approval. And even when they get over that hurdle, a great many potential buyers are still holding back and opting to rent rather than buy in the belief that the value of new and secondhand homes will go on sliding for some time to come.

Two of the largest letting agencies, Sherry FitzGerald Lettings and Savills, are reporting that rents in the city centre and some of the suburbs are rising again because of a shortage of supply.

Eileen Sheehy, who operates five offices across the city for Sherry FitzGerald Lettings, says the market has strengthened considerably in recent weeks and they are now advising landlords to increase the rents when leases come up for review. There was a particular shortage of four-bedroom houses which were renting at anything from €2,000 to €3,500 per month.

Some rents in Blackrock had risen by 30 per cent and they had just agreed a rent of €2,600 per month on a house in Avoca Park. Only six weeks ago a similar house was making €2,300.

Sheehy also cited the example of two-bedroom apartments at Harbour View in Dún Laoghaire that were renting at €1,350 per month a year ago and have now been repriced at €1,600.

Savills, which reopened its residential letting service in the past year, also notes a much increased demand for apartments in Dublin city centre, many of which are now renting from €1,300 to €1,400 per month.

Ronan O’Driscoll, head of residential services at Savills, estimates that with the slowdown in sales builders have put about 2,600 newly built apartments and houses on the rental market in the greater Dublin area over the past year but says few, if any, are located in the city centre. Most of the units had been rented promptly, many of them taken by overseas workers and others by Irish people who might otherwise have settled for dingy flats and bedsits in Rathmines and Rathgar.

O’Driscoll also says because of the changing market conditions, rent-to-buy schemes are no longer working. People who rented these properties with the option of offsetting the rent against the purchase price are pulling out of the schemes as selling prices continue to fall, he says. The end result is that these people are staying in the rental market.

The recovery in city rents, even if only temporary, is one of the few encouraging signs in the residential market for some time. Two other developments in the coming weeks could well shape both the sales and rental markets for some considerable time.

Firstly, the Department of the Environment is to publish details of the stock of unsold and unfinished apartments and houses throughout the country. The study should bring clarity to the size of the problem and show where the surplus stock is located.

Also coming up fast is the forced sale of a number of apartment developments, some of them in popular south Dublin locations such as Sandyford. They will all be priced to sell and are likely to appeal mainly to first-time buyers from from local areas. These sales might well mark the bottoming out of the new-homes market.