Andy Brainin, director at South Hill Capital, comments on what Dublin stands to gain from increasing rent prices.
Dublin’s economy is, for the first time in many years, showing signs of long-term growth. With economic prosperity building momentum, the property market is reaping the benefits of the increasing interest shown by large firms towards Dublin. Both residential and commercial spaces in Dublin are becoming hotter than ever.
Market prices for property can often play an integral role in the way that an economy is able to grow and adapt. One of the key forces driving Dublin’s economy is Foreign Direct Investment (FDI) from large firms buying up commercial space. The benefit of fuelling an economy with FDI is that, as long as the company continues to grow, it will ensure increasingly high levels of employment. With employment and population growth comes higher demand for residential properties.
An interesting by-product of FDI to an economy is that demand for living space tends to come from a variety of stakeholders. Companies will, for instance, have trusted employees commuting to their new office spaces to ensure that their new investment is in safe hands, fuelling demand for short and medium term living space. Hotels, short-term rentals and shared-living spaces are all in for a boost. Workers coming from far-afield will also have differing housing expectations, some higher and some lower than what Dublin currently has on offer. As a result of this, new tiers of liveable space may begin to crop up, thereby improving consumer choice and easing pressure on increasing rental prices, while offering liveable space at the required level for all consumers.
Equally, the effect of higher rents on housing trends may lead to improvements in Dublin’s landscape. While it isn’t a sure bet, past experience has shown us that in densely populated areas, where demand is consistently rising and rents are going up, the economy is able to self-right via the development of previously neglected areas. Increasing rents make people more eager to find viable living spaces in cheaper areas of the city, which often has the effect of improving the residential offering throughout the city.
With more people now living in these previously neglected areas, there becomes sufficient demand for amenities such as small supermarkets, launderettes etc. which helps to introduce additional jobs and improve employment levels. The initial investment in the area, in this instance resulting from a demand for housing, has a disproportionately positive effect on the GDP of the economy, especially when consumer investment compounds with Government intervention. Given the propensity for economic growth that Dublin now has, it’s highly likely that Government objectives will include aiding housing expansion and investing in infrastructure.
One might also argue that with rising rent prices comes the expectation of an improved built environment. One of the potential causes of increased rental prices, alongside higher demand, is in the form of landlords improving and maintaining their properties. This short-term cost is often passed on to tenants in the form of higher rents.
As a result, we might well see an improved overall landscape for Dublin, with enhanced services and more efficient, modern buildings, for which and occupants could and should be prepared to pay higher rents in return.