[Article] Rents have fallen 2% - report

Victor

http://www.rte.ie/news/2008/0520/economy.html

Rents have fallen 2% - report
Tuesday, 20 May 2008 07:30

Rents are now 2% lower than they were in January, according to property website Daft's latest rental report.

This is the first fall in rent in four years and Daft says it signals a move from the boom period of ever-growing rents to a calmer period of more normal growth.

The average monthly rent now stants at €1,369, showing a 2% fall since the start of the year. This is largely down to an increase in the number of properties available to rent.
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12,000 properties are now available, double the properties that were available in May last year.

There are some regional variations - rents in west Dublin have gone up slightly, while rents in Limerick city and Dublin city centre have fallen by 3%.

Daft says that rents will continue to fall, which is good news for renters.

And it is not all bad news for landlords - if their investment is long-term, the quality of their property is high and the property is professionally managed, Daft says they do not need to be concerned.

http://www.rte.ie/business/2008/0520/daft.html

First drop in rents in four years
Tuesday, 20 May 2008 07:05

Rents are now 2% lower than they were in January, according to property website Daft.ie's latest rental report. This is the first fall in rents in four years and Daft says it signals a move from the boom period of ever growing rents to a calmer period of more normal growth.

The latest Daft.ie national rents index shows that after being close to an average of €1,400 late last year, the national average rent has fallen to about €1,370 in April.

The index says that the rate of rent inflation has cooled from an average of 12.4% in the first quarter of 2007 to 3.5% in the first quarter of this year. Rents have fallen since January, dropping by about 2% between January and April.

It adds that while inflation in rents in Dublin is still the highest in the country, the top rate of inflation has fallen to 6% from as high as 12% late last year.

Daft.ie also says that the number of properties available to rent countrywide has increased from 6,500 in mid-2007 to almost 12,000 now.

Eoin O'Sullivan, a lecturer in Social Policy at Trinity College Dublin, says it is surprising that the rate of decrease in average rents is modest, given that the stock of rental properties nationwide increased from over 5,000 in May 2007 to almost 12,000 in May 2008.

He says a decline in employment in the construction sector, an easing in the flow of new migrants, sluggish sales on new houses which has lead in some cases to developers renting rather than selling their properties, are all possible contributors to the growth in properties available to rent.

SimpleSam06

12,000 properties are now available, double the properties that were available in May last year.

If you double the available rental supply over the course of a year, I'm surprised rents haven't fallen by a lot more.

gurramok

We bears had predicted at least a drop was in the pipeline a while back.

If only we had proper collation of rental stats, the CSO collects them from estate agents as found out on the pin which are very circumspect as they do not contact tenants.

whiskeyman

Good to see this getting good coverage.
As someone currently about to step back into the rental market, I hope a lot of landlords and agencies out there realise the shift and it's becoming a renters market now.

How do you think such coverage will affect things?
Will it scare private landlords with empty properties, forcing them to lower rent again to be more competitive?

ronbyrne2005

This is based on asking prices I think so real falls in market rate could be much more.

BigglesMcGee

Pity its not something significant.

That would make my wallet better off by only about €20 month. 1 cup of coffee a week.

Sorry, high rents are a sore point with myself and the wife these days.

ronbyrne2005

BigglesMcGee wrote: »

Pity its not something significant.

That would make my wallet better off by only about €20 month. 1 cup of coffee a week.

Sorry, high rents are a sore point with myself and the wife these days.

If you look at rental yields rents look cheap compared to a mortgage on an equivalent property.

The_Conductor

ronbyrne2005 wrote: »

If you look at rental yields rents look cheap compared to a mortgage on an equivalent property.

Though those yields are heading north at the moment- despite the falls......

Victor

BigglesMcGee wrote: »

That would make my wallet better off by only about €20 month. 1 cup of coffee a week.

Coffee at €5 a cup? x 3 cups a day x 30 days = €450/month. You have the wrong priorities.

SkepticOne

I wonder where Daft are getting their year-on-year rent inflation of 3.5%. According to their own figures, if we compare the current report (Daft-Rental-Report-Q1-2008.pdf) with one for roughly the same period the year before (Daft-Rental-Report-June-2007.pdf) we see the following:

2008:

Having been at or close to an average of €1,400 in late 2007, the national average rent has fallen €30 to €1,370 in April [2008].

2007:

The average rent nationwide in May 2007 was €1,382, its highest level since the index began in 2002.

So from May 2007 to April 2008 there's been a slight drop. Yet all this time there's been an assumption in the media that rents are shooting up.

whiskeyman

SkepticOne wrote: »

Yet all this time there's been an assumption in the media that rents are shooting up.

It's what I assumed too before looking into the rental market.
I assumed because house prices were going down (and looked to continue to drop), buyers would hold off and do so buy renting in the interim.

This type of situation is happening in the UK at the moment:
http://news.bbc.co.uk/2/hi/business/7404947.stm

I guess we just happen to have no shortage of supply, although it's as if the property market doesn't want to 'admit' to a fall in both areas?

BigglesMcGee

Victor wrote: »

Coffee at €5 a cup? x 3 cups a day x 30 days = €450/month. You have the wrong priorities.

I only buy 1 a day. But i take your point. Im giving it up

SkepticOne

whiskeyman wrote: »

I assumed because house prices were going down (and looked to continue to drop), buyers would hold off and do so buy renting in the interim.

This type of situation is happening in the UK at the moment:
http://news.bbc.co.uk/2/hi/business/7404947.stm

What people fail to take into account is that when potential buyers hold off buying in favour of renting, not only is rental demand increased but so is supply, since those properties that would have been bought are now placed on the rental market. There is a temporary rise in rents, however, when the market turns because landlords trying to exit the market generally try to sell empty properties thus lowering rental supply. This happened in 2006-early 2007 in Ireland and seems to be happening in Britain now.

adam.number2

People expecting the rents to decrease in line with the corresponding increase in supply also seem to fail to grasp that it is not a simple supply and demand curve. The reason is simple. People don't want to move out of their homes/areas. This reluctance to move, means that Landlords can continue to charge the same rent (or even increased rent) despite the fact that the natural supply/demand rate may have decreased. The only way rents would decrease in line with supply/demand is if people had little or no resistance to moving, or contractural obligations to stay (i.e. 1 year lease).

SkepticOne

adam.number2 wrote: »

This reluctance to move, means that Landlords can continue to charge the same rent (or even increased rent) despite the fact that the natural supply/demand rate may have decreased. The only way rents would decrease in line with supply/demand is if people had little or no resistance to moving, or contractural obligations to stay (i.e. 1 year lease).

That is an interesting point. It works both ways of course. Whereas resistance to move is favourable to a landlord with a tenant is is unfavourable to one seeking a tenant.

I think the real drops in the rental market are yet to come for this reason. More and more properties are coming on to the rental market (see daftwatch) yet existing tenants are, as adam.number2 points out, bound up in contracts or reluctant to move for other reasons. For a while these landlords will advertise high rents but eventually be forced to take the hit.

Afuera

adam.number2 wrote: »

This reluctance to move, means that Landlords can continue to charge the same rent (or even increased rent) despite the fact that the natural supply/demand rate may have decreased.

The Residential Tenancy Act 2004 can put a spanner in this however since it states that the landlord can not set the rent above market rate. A landlord attempting to take advantage of a tenant's unwillingness to move can be blocked from raising the rent if the tenant simply lodges a complaint with the PRTB.

SimpleSam06

So we're looking at late 2008/early 2009 before rents really start to drop?

BigglesMcGee

Afuera wrote: »

The Residential Tenancy Act 2004 can put a spanner in this however since it states that the landlord can not set the rent above market rate. A landlord attempting to take advantage of a tenant's unwillingness to move can be blocked from raising the rent if the tenant simply lodges a complaint with the PRTB.

Has this EVER happened though.
They seem to bad enough at even organizing a hearing.

johnnyskeleton

rte wrote:

And it is not all bad news for landlords - if their investment is long-term, the quality of their property is high and the property is professionally managed, Daft says they do not need to be concerned.

Uh-oh.

Afuera

BigglesMcGee wrote: »

Has this EVER happened though.
They seem to bad enough at even organizing a hearing.

There are a few examples from last year here:
http://www.prtb.ie/tribunal2007.htm

The rent increase can't go through until it's resolved so the slow nature of the PRTB works in favour of the tenant here.

adam.number2

Hmmm that link lists 66 (or so) cases. 2 of them are to do with high rent rates and if you actually read the case detail you'll see that the cases have more going on than just rent increases. The first case, [FONT=&quot]Tom Horan and Anne Horan Vs [/FONT][FONT=&quot]Scott Logan, Mr Logan [/FONT]was trying to get rid of the Horans in a large subdivided house, so that he could fix the heating system for the other tenants. The judge found against him because he would have been in a position to provide alternative accom. The other case, [FONT=&quot]James A. Devlin vs, [/FONT][FONT=&quot]Timothy MacDermot-Roe[/FONT] was in a holiday location, where the auctioneer was trying to get rid of the tenant so that he could rent out the property more profitably during the summer.

Neither case have anything to do with landlords failing to _reduce_ rates so that they stay in line with the market. That would be a much more difficult case to take IMHO.

Afuera

Remember the Residential Tenancies Act has only been in place for the last 4 years and during that time rental rates were creeping up slowly. Over this time there was no reason for tenants to question rental increases as they could clearly see on daft and elsewhere that they would not be able to rent something comparable for cheaper. For this reason, I doubt there have been too many cases taken against landlords for setting rents above market rate yet.

According to the legislation there is nothing stopping tenants from throwing a complaint in to the PRTB if they feel the landlord is unfairly raising the rent or if they feel their current rate is above market rate though. The PRTB have all of the data close to hand so I doubt these cases will even have to go to trial to get resolved. TBH I can't see any difficulty using this to get a rent reduction. Given the supply situation at the moment I reckon it will become a bigger feature of the Irish rental market than you'd care to imagine.

BigglesMcGee

Afuera wrote: »

There are a few examples from last year here:
http://www.prtb.ie/tribunal2007.htm

The rent increase can't go through until it's resolved so the slow nature of the PRTB works in favour of the tenant here.

So it has never happened then. What a waste of time reading that. If a tennant did bring a case of this type and they lost the case they would be liable for backdated payments and vica versa of course?

I dont really think it would be allowed to be used as an interference tactic at all.

worded

Afuera wrote: »

There are a few examples from last year here:
http://www.prtb.ie/tribunal2007.htm

The rent increase can't go through until it's resolved so the slow nature of the PRTB works in favour of the tenant here.

Never realised how well the PRTB worked.

worded

Ballsbridge rent Was 2400 now 1700 ! - and on the market 1 mth

http://www.irishpropertywatch.com/vi...5374&Site=daft



From the 11th to the 18th of June 2008 there were 1,084 rent reductions. The average reduction was €98 per month.
There were 112 rent increases over the same period, the average increase was €120.

The number of properties for rent in Ireland increased to 14,440 from 13,662 the previous week

Please click here for the full report.

16% (2,352) properties currently for rent have been on the market for more than 3 months. The average rent of these properties (€1,387) 15% above the average rent of all other properties listed (€1,204).

49% (6,717) properties currently for rent have been on the market for more than 1 month.


2,820 properties were let in the last week and the average rent was €1,131.
While the average rent for the properties that remained on the market was 8.5% higher at €1,228 per month.

SimpleSam06

worded wrote: »

2,820 properties were let in the last week and the average rent was €1,131.
While the average rent for the properties that remained on the market was 8.5% higher at €1,228 per month.

The writing on the wall is fairly clear there.