Irish PRS: Daft.ie Q2 rental market report shows annual rental inflation of 6.7%

20 Aug 2019

Rental inflation has halved from a high of 12.4% in mid-2018 to 6.7% in mid-2019. 

The supply shortage remains chronic with just 2,700 homes available to rent nationwide as of 1 May 2019, the lowest on record. Outflows continue to rise as higher house prices allow accidental landlords to exit the sector. According to Daft.ie, the estimated shortfall of homes to rent is c. 70,000. While there is a burgeoning supply response with c. 26,281 (Daft.ie cites LIV consult) units in construction or planning for 2019-2025, this falls short of both the current unmet demand and new house formation. Government rental caps of 4% remain in place to 2021. 


Brexit update

In his first formal step in Brexit negotiations with the EU since becoming Prime Minister, Boris Johnson sent a letter to the President of the European Council Donald Tusk. In this letter, he set out the government’s argument for removing the contentious ‘backstop’ from the Withdrawal Agreement. 

The PM set forth three reasons: i) that it is “anti-democratic and inconsistent with UK sovereignty”; ii) that “it has become increasingly clear that the backstop risks weakening the delicate balance embodied in the Belfast (Good Friday) Agreement”, and; iii) that it is “inconsistent with the UK’s desired final destination for a sustainable long-term relationship with the EU”. On this final point Boris appears to be diverging from the position of his predecessor by suggesting that environmental policy, regulations and laws may diverge from those of the EU in the future. Theresa May’s plan had argued for an “alignment of rules”. Though the letter states that the government views leaving the EU with a deal was of the “highest priority”, its focus on removing the backstop clearly sets out the PMs position on what is considered an essential part of any agreement by the EU.
 
The response from the EU has been frosty this morning, with Irish officials pointing out that the PM’s letter fails to offer any credible alternative to the backstop, instead suggesting that the backstop be replaced with a commitment to an “alternative arrangement”. Notably, this letter looks to be putting the government’s arguments forward on the backstop ahead of the PM’s meetings with Angela Merkel (Wednesday) and Emmanuel Macron (Thursday) and ahead of this weekend’s G7 gathering in Biarritz.
 

RBA minutes

The Reserve Bank of Australia (RBA) board discussed methods of pumping more money into the economy amid growing concerns over trade tensions between China and the US, and fears of a local downturn. RBA's minutes revealed that the board will consider unconventional monetary stimulus and further easing is possible, if required. The RBA has historically relied only on setting interest rates to stimulate or slow down the economy and the minutes show it will consider cutting further from a record-low 1 per cent if the situation does not improve.


China cuts lending rates

China has lowered its lending reference rate through a new market-oriented pricing mechanism, providing a modest easing of monetary conditions to help support the world’s second largest economy. The new one-year loan prime rate (LPR), which is the average of the rates that 18 designated banks charge their biggest clients, was set at 4.25 per cent, according to the National Interbank Funding Centre, a unit of the People’s Bank of China (PBOC). The new rate was lower than the previous LPR of 4.31 per cent and lower than the old benchmark lending rate of 4.35 per cent.


Economic Releases

11.00 UK CBI Industrial Trends Orders
23.00 US FOMC Member Quarles Speaks