Rents to Rocket?

Milk & Honey

Rents in Dublin will edge up sharply when the housing shortage kicks in

http://www.independent.ie/national-news/house-shortage-likely-with-just-8000-builds-this-year-3126444.html

Just 8,000 houses will be built across the entire country this year, compared with the peak of 93,000 in 2006, with Dublin now likely to face a housing shortage in a matter of months, new figures suggest.

Housing builds are so low that almost two-thirds of the houses built are now "made to order" rather than as part of a housing estate or apartment block.

New figures from the Construction Industry Federation (CIF), obtained by the Sunday Independent, show that between 7,500 and 8,000 houses will be finished this year -- a drop of more than 25 per cent on last year.

As shown in figures for the first three months of this year, 1,931 new housing units were built between January and March, compared with 2,766 new units during the same period in 2011.

But in worse news, the number of houses started in the first three months of 2012 has plummeted by 42 per cent, from 1,401 to just 800.

The figures show that almost two-thirds, 61 per cent, of all completions between January and March were "individual housing units generally built to order rather than scheme units or apartments".

"The latest statistics reveal that the level of new house building activity remains severely depressed, which points to a further sharp decline in output for 2012," CIF director Hubert Fitzpatrick told the Sunday Independent.

The figures reveal that 23 of the 26 counties had less than 50 individual house starts in the first three months, with only six official starts in Leitrim.

Carlow, Longford and Roscommon all had just 10 house starts, while Co Wicklow had just 15 starts.

"Output of 7,500 to 8,000 units would be significantly below the estimated sustainable demand for new housing.

"Taking into account demographics and the rate of new household formation, CIF estimates that the sustainable demand for new homes will be 25,000 units annually," Mr Fitzpatrick said.

The CIF is again predicting that the greater Dublin area, which saw just 277 housing completions during 2011, is facing into a shortfall of housing in a matter of months, with another bubble likely in some areas.

"Given the depressed state of new construction activity in the new homes sector, it is anticipated that we are not far away from seeing a shortfall of new housing units, particularly in the greater Dublin area," Mr Fitzpatrick added.

The dire warning from the CIF comes as lending to households for mortgages and consumer spending fell again in April, dropping by nearly four per cent, or €632m, compared with a year earlier.

Latest Central Bank figures show that this follows a decline of 3.9 per cent for the year ending March 2012.

The Central Bank said developments in April were largely driven by a decrease in loans for consumption purposes of €394m.

Loans for house purchase and other purposes also decreased by €188m and €51m respectively.

whippet

quick Henny Penny the sky is falling down!!!! Everyone get out an Buy as quickly as possible.

The Indo & the Construction Industry Federation are talking about a lack of supply .. they must be telling the truth and this elusive bottom of the market has been found !!!

kneemos

CIF=pinch of salt.

snubbleste

Oh no
We're running out of land
The banks are going to stop lending soon
Rent is dead money
If you don't get on the ladder soon you never will

washman3

Is that fcukwit Tom Parlon behind this by any chance?? a total chancer who was one of the main cheerleaders of the farce that was the "Celtic Tiger"
How a gombeen like this can still command airtime and printspace just beggers belief. In any "normal" country he would be behind bars by now.:mad:

highfive

Eh what about all those ghost estates?..

ABajaninCork

highfive wrote: »

Eh what about all those ghost estates?..

Took the words right outta my mouth!:D

christmas2012

DONT talk up rent prices it might just happen

jayteecork

What a load of crap.

"housing shortage" me hole.

gurramok

Milk & Honey wrote: »

Rents in Dublin will edge up sharply when the housing shortage kicks in.

The BS article mentions nothing about rents so what is your opinion for saying "rents will skyrocket"? Go on, tell us.

Milk & Honey

gurramok wrote: »

The BS article mentions nothing about rents so what is your opinion for saying "rents will skyrocket"? Go on, tell us.

The first law of economics. Supply and demand. Supply runs out and demand rises. What happens? Price goes up. There are not many ghost estates in Dublin. It has always happened before, when there is a housing shortage rents go up.

dearg lady

I'd imagine there could be pockets where rents will go up, if there's not much housing available in a particular area. For example last year, I struggled to find a 3 bed in the city centre, so there was absolutely no room to negotiate on rent. I could see this happening. But probably not rents all over Dublin.

Zamboni

Milk & Honey wrote: »

The first law of economics. Supply and demand. Supply runs out and demand rises. What happens? Price goes up. There are not many ghost estates in Dublin. It has always happened before, when there is a housing shortage rents go up.

It is a good thing there is a massive oversupply of housing in Dublin then.

the groutch

sounds like it was written by Brendan O'Connor

Will the independent ever f off. Seriously.

Milk & Honey

dearg lady wrote: »

For example last year, I struggled to find a 3 bed in the city centre, so there was absolutely no room to negotiate on rent.

That situation will intensify and rents will be bid up. Eventually people can't afford it and switch to smaller units or alternative locations. That in turn puts pressure on other market sectors. Unless there is a large reservoir of unused housing the ripple effect will have effects right through the market.
There is very little building. There are more investors leaving the market than entering. The inevitable effect is that rents will go up.

StillWaters

I agree, but I think 'rocket' is an overstatement, I can't see rents rising more that 5-6% in the major urban centres, and holding firm elsewhere.

Coriolanus

Milk & Honey wrote: »

dearg lady wrote: »

For example last year, I struggled to find a 3 bed in the city centre, so there was absolutely no room to negotiate on rent.

That situation will intensify and rents will be bid up. Eventually people can't afford it and switch to smaller units or alternative locations. That in turn puts pressure on other market sectors. Unless there is a large reservoir of unused housing the ripple effect will have effects right through the market.
There is very little building. There are more investors leaving the market than entering. The inevitable effect is that rents will go up.

There is a large reservoir of unused housing though...
The basic premise of the article is false.

sharper

Milk & Honey wrote: »

The first law of economics. Supply and demand.

An important aspect of demand is being willing and able to pay higher prices. With high unemployment, slow growth and ever increasing taxes people have little latitude with which to pay higher rents.

Victor

dearg lady wrote: »

I'd imagine there could be pockets where rents will go up, if there's not much housing available in a particular area. For example last year, I struggled to find a 3 bed in the city centre, so there was absolutely no room to negotiate on rent. I could see this happening. But probably not rents all over Dublin.

And in contrast, rents in other locations will fall further.

The problem you likely encountered is that there are fewer three-beds in the city centre.

Milk & Honey

sharper wrote: »

An important aspect of demand is being willing and able to pay higher prices. With high unemployment, slow growth and ever increasing taxes people have little latitude with which to pay higher rents.

Individuals may avoid paying more by packing in tighter or living in smaller spaces. people might find themselves paying for a two bed what they once paid for a three bed.
Where are all the ghost estates in Dublin? Where is all this massive oversupply? Where is the reservoir of unused accommodation?
there is no evidence of it. After 4 years of building below the replacement rate the overhang is almost gone!

sharper

Milk & Honey wrote: »

Individuals may avoid paying more by packing in tighter or living in smaller spaces. people might find themselves paying for a two bed what they once paid for a three bed.

That's not how supply and demand works.

The population only has "demand" for rentals at certain prices. Above that price and people simply cannot pay it or will not pay it. For example for a person earning minimum wage they obviously cannot pay a rental price that leaves them unable to live. They also likely will not pay a rental price that leaves with them with no income after rent and food.

It's not the case that some "individuals may avoid paying more". The market is a collection of individuals, both landlord and tenant. For rents to "rocket" there has to be money available to drive rents up.

After 4 years of building below the replacement rate the overhang is almost gone!

How many property transactions have taken place in the last 4 years?

Caseywhale

There is no shortage of property in Dublin. Where are they getting that?
No houses should be built at all in Dublin or anywhere else in this country until all the empties are either knocked down or occupied.

dearg lady

Victor wrote: »

And in contrast, rents in other locations will fall further.

The problem you likely encountered is that there are fewer three-beds in the city centre.

oh absolutely. Actually, does anyone know what the no of empty properties in Dublin is?

dvpower

Caseywhale wrote: »

There is no shortage of property in Dublin. Where are they getting that?
No houses should be built at all in Dublin or anywhere else in this country until all the empties are either knocked down or occupied.

No shortage of apartments, but a shortage of 3 bed semis in some areas of Dublin. Property prices have been rising in Dublin.

Milk & Honey

sharper wrote: »

That's not how supply and demand works.

The population only has "demand" for rentals at certain prices. Above that price and people simply cannot pay it or will not pay it. For example for a person earning minimum wage they obviously cannot pay a rental price that leaves them unable to live. They also likely will not pay a rental price that leaves with them with no income after rent and food.

If they are priced out of the accommodation they want they have to seek an alternative. Some will be able to afford more, some won't.

sharper wrote: »

It's not the case that some "individuals may avoid paying more". The market is a collection of individuals, both landlord and tenant. For rents to "rocket" there has to be money available to drive rents up.

If there is the same amount of money going into fewer properties, prices will go up.

sharper wrote: »

How many property transactions have taken place in the last 4 years?

The number of transactions is not particularly relevant. In some trading up situations there may have been 20 related transactions until someone bought a new house or an executor sale. This would have no effect on the rental market. The key issue is how many investors are exiting the market and how many are coming in.

syklops

My father always said, "You never ask a barber whether you need a haircut"

Thread title should be "Federation whose members have been hit by the downturn in houses not being built say we should build more houses".

Non-story, nothing to see here.

Monty Burnz

Milk & Honey wrote: »

The first law of economics. Supply and demand. Supply runs out and demand rises. What happens? Price goes up. There are not many ghost estates in Dublin. It has always happened before, when there is a housing shortage rents go up.

Not many ghost estates, but thousands of empty apartments. When they finally put them on the market (rental or sales), do you think people would rather rent houses with 3 others, or rent an apartment alone or with a friend/partner? This will be handy in freeing up lots of houses around the city.

Monty Burnz

Milk & Honey wrote: »

Individuals may avoid paying more by packing in tighter or living in smaller spaces. people might find themselves paying for a two bed what they once paid for a three bed.
Where are all the ghost estates in Dublin? Where is all this massive oversupply? Where is the reservoir of unused accommodation?
there is no evidence of it. After 4 years of building below the replacement rate the overhang is almost gone!

Delusion. NAMA alone have about 6,000 properties yet to come onto the market in Dublin alone. Is that evidence enough?

Of course that doesn't include all the properties still in private hands and kept off the market for the last few years waiting for a miracle recovery, and the properties that are partially completed that can be finished cheaply and sold the moment the market shows any hint of life at all.

dvpower

Monty Burnz wrote: »

Delusion. NAMA alone have about 6,000 properties yet to come onto the market in Dublin alone. Is that evidence enough?

That NAMA property is all apartments (I note they're calling them flats again).
There does appear to be demand for standard 3 bed semis in decent areas in Dublin.

Milk & Honey

Monty Burnz wrote: »

Delusion. NAMA alone have about 6,000 properties yet to come onto the market in Dublin alone. Is that evidence enough?

Of course that doesn't include all the properties still in private hands and kept off the market for the last few years waiting for a miracle recovery, and the properties that are partially completed that can be finished cheaply and sold the moment the market shows any hint of life at all.

That linked article is almost two years old. Any rented properties which have been kept off the market will reduce supply whenever they are sold. Many have in fact been put into receivership and sold off.
NAMAs strategy appears to be to sell and not rent. That is why they are trying to guarantee against negative equity.

Monty Burnz

Milk & Honey wrote: »

That linked article is almost two years old. Any rented properties which have been kept off the market will reduce supply whenever they are sold. Many have in fact been put into receivership and sold off.
NAMAs strategy appears to be to sell and not rent. That is why they are trying to guarantee against negative equity.

Indeed. Check out this article for a month ago that suggests NAMA may have been understating all along the number of properties it controls...

Fact: NAMA claims that it controls loans underpinning 10,000 houses and apartments in the Republic of Ireland. It told an Oireachtas hearing in September 2011 “We believe that we have 10,000 residential units in our portfolio. Fewer than 2,000 of these would be regarded as houses, whether detached or semi-detached. We have approximately 8,000 apartments.”

<snip>

So 10,000 homes subject to NAMA’s loans is significant but out of an overhang of 80-100,000 it doesn’t give NAMA a dominant position, unlike the Irish commercial property market where NAMA control 15 times the size of the total market in 2011. However the figures above indicate NAMA has either control over relatively expensive housing or it controls more than it is letting on.

Milk & Honey

8,000 apartments in the republic of Ireland? Considering how many vacant units there are all over the West it would seem that 6,000 in Dublin is an overestimate. that article also predates the 20% guarantee scheme Nama has launched.

Monty Burnz

Milk & Honey wrote: »

8,000 apartments in the republic of Ireland? Considering how many vacant units there are all over the West it would seem that 6,000 in Dublin is an overestimate. that article also predates the 20% guarantee scheme Nama has launched.

This 20% guarantee thing was for about 50 houses only. The 6000 apartments figure stands unless you can show me evidence that these apartments have been sold.

I don't know where you get the notion that the apartments have to be evenly distributed around the country?

jmayo

Feckin hell what an opening post.
Just back from holiday in France and needed a laugh.
I have to say we Irish do have a hell of a sense of humour.

No matter how sh**e the situation and how unrealistic the hopeful outcome, someone will believe it is true and pedal it for all they are worth.

I suppose that mindset did help us survive famines and centuries of colonisation.
Then again it may have helped prolong those things as well.

gurramok

Milk & Honey wrote: »

8,000 apartments in the republic of Ireland? Considering how many vacant units there are all over the West it would seem that 6,000 in Dublin is an overestimate. that article also predates the 20% guarantee scheme Nama has launched.

For your eyes http://airomaps.nuim.ie/flexviewer/?config=Census2011.xml

http://irelandafternama.wordpress.com/2012/03/30/housing-vacancy-at-the-new-small-area-level/

In contrast, South Dublin, Fingal and Dún Laoghaire-Rathdown have more than 80% of their SAs with less than 10% vacancy. That is not to say that there is little vacancy in the cities. Figure 2 shows the vacancy levels for the Dublin city centre (dark orange and red is above 25% vacancy). Dublin City local authority has 7,995 vacant houses and 16,321 vacant apartments, with an oversupply of 9,815 given a 6% base vacancy rate (how many units we would normally expect to be vacant). 787 Small Areas in Dublin City (out of 2202) have vacancy levels over 10%, 115 of which have vacancy levels over 25%.

Ray Palmer

It is easily possible to have a shortage of rental property in Dublin. Next year a ton of bedsits are to disappear. Those residents will take up a portion of the many apartments.
There really isn't ghost estates in the Dublin . People are moving up to Dublin to work. People are staying during the week and going home at the weekends. More people are going to college as there are no jobs. That is an increase in renters.
Rent will go up but better accommodation for some. Others will pay more to be away from some types of neighbours.
I don't ever remember minimum wage getting you a place to rent of any worth in Dublin.That won't change now either.

desertcircus

This evening I had to decide between cycling home past Elmpark in Booterstown and getting the bus past the Grange in Stillorgan. If the price of three-bed semi rental goes up, people will start looking at these places instead - presuming they eventually go on the market.

iguana

I know it's not any sort of indicator for the whole market but that article couldn't be further from my experience. I rent a lovely house in D6W and last week our landlord called round and knocked €100pm off the rent. We didn't even ask him to, he just suggested it as he wanted to incentivise us to stay.

Kosseegan

desertcircus wrote: »

This evening I had to decide between cycling home past Elmpark in Booterstown and getting the bus past the Grange in Stillorgan. If the price of three-bed semi rental goes up, people will start looking at these places instead - presuming they eventually go on the market.

Elm Park apartments are let already.

hardCopy

dvpower wrote: »

No shortage of apartments, but a shortage of 3 bed semis in some areas of Dublin. Property prices have been rising in Dublin.

Found it very hard to find a 3 bed in D3 area last year, anything that came up was gone within the day, people must have been committing over the phone without viewing. Ended up taking an older 4 bed for similar money.

Ray Palmer

hardCopy wrote: »

[


Found it very hard to find a 3 bed in D3 area last year, anything that came up was gone within the day, people must have been committing over the phone without viewing. Ended up taking an older 4 bed for similar money.

what will happen is the areas close by will be taken next and then rent rises there too.
Nothing happens in a vacuum. Rents likely to rise when students return after the summer. I doubt they will rocket. Likely to have student parents buy houses near colleges again as it will be more affordable.

desertcircus

Kosseegan wrote: »

desertcircus wrote: »

This evening I had to decide between cycling home past Elmpark in Booterstown and getting the bus past the Grange in Stillorgan. If the price of three-bed semi rental goes up, people will start looking at these places instead - presuming they eventually go on the market.

Elm Park apartments are let already.

Really? There appears to be a fairly serious potential plan to convert the site to a children's hospital at the moment (mentioned on the Irish Medical Times website a fortnight ago).

Doc Ruby

I'd say the government cutting rent relief will put a lot more downward pressure on rents than any imagined shortage will drive them up.

gurramok

Ray Palmer wrote: »

Nothing happens in a vacuum. Rents likely to rise when students return after the summer. I doubt they will rocket.

If the rents rise when students return, what happens when the students leave in June?!:rolleyes:

kippy

On a serious note, what is the medium term future for the rental market?
I assume there are two distinct areas for rent, Dublin (and the cities) versus rural towns and rural areas.
I would assume that rents in Dublin are going to go up in the next few years.

gurramok

kippy wrote: »

On a serious note, what is the medium term future for the rental market?
I assume there are two distinct areas for rent, Dublin (and the cities) versus rural towns and rural areas.
I would assume that rents in Dublin are going to go up in the next few years.

For Dublin, there are of course migration patterns. Thrown into the mix is the recent reduction in Rent Supplement which might offset that demand. Of course if we get some renters deciding to buy, Nama releasing rental property, the unemployment situation improving(big if) and along with the unknowns of the Eurozone, we can rule out a rocketing of rents anyway.

Zamboni

kippy wrote: »

On a serious note, what is the medium term future for the rental market?
I would assume that rents in Dublin are going to go up in the next few years.

Based on what though?
As gurramok points out there are many variables affecting the market from both sides.

RATM

Ray Palmer wrote: »

It is easily possible to have a shortage of rental property in Dublin. Next year a ton of bedsits are to disappear. Those residents will take up a portion of the many apartments.
There really isn't ghost estates in the Dublin . People are moving up to Dublin to work. People are staying during the week and going home at the weekends. More people are going to college as there are no jobs. That is an increase in renters.
Rent will go up but better accommodation for some. Others will pay more to be away from some types of neighbours.
I don't ever remember minimum wage getting you a place to rent of any worth in Dublin.That won't change now either.

Directly across from where I live (Dublin 11, inside the M50) I can see 85 balconies. At night time there is 12 lit up and it has been like that since 2009. The building was built by the Bailey brothers who are now in Nama. Not a single unit has been let or sold in the last 3 years, all the while values are dropping sharply.

There may not be many ghost estates in Dublin in the Cavan/Leitrim sense but there are blocks of apartments lying wholly or partly empty. At some stage Nama will have to offload these. When they do it will undoubtedly affect the market. An 2 bed apartment in my own building has been for sale for 18 months now asking €125,000 with (obviously) no offers at the price they want. I reckon it could be had for €105,000 for a quick sale. Now if Nama go and release the 70 odd empty apartments across the road then my neighbour might be lucky to get €90,000 for his own place.

gurramok

There is also an empty block at Milners Square in Santry. Its quite visible as you walk by on the footpath. As stated by myself before, there are empty newly built houses at Heathfield, Finglas also visible from the roadside. You can even see some empties from the train at Clongriffin. I'm sure other posters can come up with more empty houses\apts in their local areas.

The map link I provided earlier gives an illustration where most of the vacants are.

Ray Palmer

Guys I didn't say empty places don't exist. Ghost estates in Dublin don't exist in any meaningful way. Well established NAMA has apartments too. Not really significant enough and when they are released and if the are rented are still unknowns.
Dublin City council empties is also misleading as they need to be fixed up and a selection process is involved.
Rent allowance reduction has not produced a rent drop after 6 months so the theory it kept rents up seems to be false.
More people renting is pretty much certain when nobody buys. That will push up rents. Rocket is unlikely afaik vacancy rate in Dublin always ran around 10% don't think it is much different now