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RA wasn't keeping rents high

  • 12-11-2012 10:35am
    #1
    Registered Users, Registered Users 2 Posts: 8,868 ✭✭✭


    As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
    So why didn't it happen?


«1

Comments

  • Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    Ray Palmer wrote: »
    As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
    So why didn't it happen?
    I think it has in some areas, read the DAFT rental report from last week, but in other areas, such as the most desirable parts of the cities it's simply supply and demand keeping rents high.

    People on RA are either coming to a private arrangement with the LL (which officially is not allowed), are moving to RAS, or are moving to areas where there is less demand.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Ray Palmer wrote: »
    As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
    So why didn't it happen?
    Rents are down everywhere in the country except Meath (where the .2% rise is way below inflation), Galway and Dublin according to the Daft rental report. When you take away general inflation from the Galway and Dublin figures, you are left with perhaps 10 square miles in the whole country where rents are not falling markedly.


  • Registered Users, Registered Users 2 Posts: 8,868 ✭✭✭Ray Palmer


    So if we take away the larger areas with the most rental properties and ignore actual figures they dropped?
    Come on that is just playing silly beggars.
    The allowance was cut a percentage and that has not been reflected. People were saying the link was direct.
    It is obvious the link was not as strong as people made out. LL haven't been forced to reduce rents and accept RA. If anything is seems less will take RA.
    It seems pretty clear that the people saying RA reductions would mostly punish people hard off and not really benefit anyone were right.


  • Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    But you are ignoring the reason for the RA cuts. They weren't brought in in order to reduce rents overall, they were brought in to save the State over €20m.

    Inevitably a by product would be a reduction in rent, particularly in areas where there was a glut of accommodation, and that has happened. I don't see you're argument about it not benefitting anyone. It has benefitted all renters and the tax payer.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Ray Palmer wrote: »
    So if we take away the larger areas with the most rental properties and ignore actual figures they dropped?
    Or, to put it your way, if we ignore 99.9% of the country, they stayed stable or rose a tiny fraction?

    Nobody ever claimed that rent allowance was propping up rents in areas of high demand. The whole point is that it set a floor in places where the demand did not justify such a floor - i.e. most of the country. Although perhaps you are one of those people who thinks that Ireland stops at the M50? :confused:


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  • Registered Users, Registered Users 2 Posts: 4,306 ✭✭✭Zamboni


    Ray Palmer wrote: »
    So if we take away the larger areas with the most rental properties and ignore actual figures they dropped?
    Come on that is just playing silly beggars.
    The allowance was cut a percentage and that has not been reflected. People were saying the link was direct.
    It is obvious the link was not as strong as people made out. LL haven't been forced to reduce rents and accept RA. If anything is seems less will take RA.
    It seems pretty clear that the people saying RA reductions would mostly punish people hard off and not really benefit anyone were right.

    There is a direct link but the required controls are not in place.
    Landlords are exploiting desperate RA tenants and weak govt controls by accepting under the counter top up payments on RA from the tenant.


  • Registered Users, Registered Users 2 Posts: 3,528 ✭✭✭gaius c


    Look at a place like Longford and the cheapest rental in the town is the RA limit so it's definitely putting a floor on prices outside the bigger cities. If rents drop in Dublin commuter towns (like say Kildare or Meath towns), people will be tempted to move out and take advantage of the lower rents. Until now, it hasn't really made sense as any savings were so small that they got gobbled up by commuting costs.

    Also, the previous situation with crap places renting for the same as good places is starting to change. Price levelling in Dublin seems to have decreased and decent places are getting a premium over the not so decent places.
    We also have to contend with the fact that many of the current renters will be gone like a flash once sales prices fall to within their range and also the fairly hefty stock of empty developments being kept empty.
    Dublin has also proportionally lost more jobs than the rest of the country so the amount of spare cash to be upgrading to nicer houses/apartments is simply not there.
    The market is nowhere near stability yet so let's wait a while before making grand pronouncements.

    We could also do with a rental version of the property price index. A house 2 doors down from us went up on Daft in August looking for €150 a month more than we were paying. It stayed on Daft for 4 months until they eventually got people in who are now paying exactly the same rent as us. Try telling that to our landlord though because he thinks the original advertised price is now the going rent for the area.


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan


    Rents are down everywhere in the country except Meath (where the .2% rise is way below inflation), Galway and Dublin according to the Daft rental report. When you take away general inflation from the Galway and Dublin figures, you are left with perhaps 10 square miles in the whole country where rents are not falling markedly.

    The last published inflation figure I saw was negative. Any rise at all is therefore significant. There are now shortages of rental offerings being reported in Dublin. There is virtually no new building, household formation is increasing so the trend is towards even tighter supply and an overspill into areas of lower demand.


  • Registered Users, Registered Users 2 Posts: 8,868 ✭✭✭Ray Palmer


    Zamboni wrote: »

    There is a direct link but the required controls are not in place.
    Landlords are exploiting desperate RA tenants and weak govt controls by accepting under the counter top up payments on RA from the tenant.
    Oh please give it up. This is just part of the many reason given before the cut.
    It was said it would not help rents for the vast majority. It was said maybe some would be helped but very few.
    It just didn't happen the way those who said it was keeping rents up said it would.

    Only those marginalised already have suffered. The objective to reduce spending worked but people have suffered. All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Kosseegan wrote: »
    The last published inflation figure I saw was negative. Any rise at all is therefore significant. There are now shortages of rental offerings being reported in Dublin. There is virtually no new building, household formation is increasing so the trend is towards even tighter supply and an overspill into areas of lower demand.
    YIY inflation is at 1.2% in October according to the CSO. We heard all the stories about running out of property during the bubble - didn't really pan out that way though. And of course we had net immigration at that time. Now we have net emigration.


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  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Ray Palmer wrote: »
    Only those marginalised already have suffered. The objective to reduce spending worked but people have suffered. All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so
    If people are moving into lower-rent accommodation and rent is falling all over the country, how does this support your argument? :confused:


  • Registered Users, Registered Users 2 Posts: 8,868 ✭✭✭Ray Palmer


    If people are moving into lower-rent accommodation and rent is falling all over the country, how does this support your argument? :confused:

    Because it didn't reduce the rent costs around. Rents didn't fall the same level. The claim was rent is linked directly with RA. That would mean 10% cut in RA would mean 10% cut in rents. It didn't.


  • Banned (with Prison Access) Posts: 1,950 ✭✭✭Milk & Honey


    If people are moving into lower-rent accommodation and rent is falling all over the country, how does this support your argument? :confused:

    Who says people are moving into lower rent accommodation?


  • Registered Users, Registered Users 2 Posts: 241 ✭✭Equality


    Rent allowance definitely props up the rental market in rural Ireland.

    The house beside me is privately rented for 250/month. The landlord won't take rent allowance, and does not need to as he has no mortgage.

    Many similar houses are rented on the same estate through rent allowance for 550 approx/month. They all charge the exact max that is allowed under rent allowance.


  • Registered Users, Registered Users 2 Posts: 3,310 ✭✭✭irishguy


    Rents are down everywhere in the country except Meath (where the .2% rise is way below inflation), Galway and Dublin according to the Daft rental report. When you take away general inflation from the Galway and Dublin figures, you are left with perhaps 10 square miles in the whole country where rents are not falling markedly.

    Really? in the area you quote there are just over 1.5M people living which is about 1/3 of the entire population. There are also a few other counties which are fairly stable, but yes there are a few areas that are going to keep dropping.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Ray Palmer wrote: »
    Because it didn't reduce the rent costs around. Rents didn't fall the same level. The claim was rent is linked directly with RA. That would mean 10% cut in RA would mean 10% cut in rents. It didn't.
    That's a very, very naive and incorrect understanding of supply and demand. If you increase the cost of bread or cars by 10%, would you expect a 10% fall in demand? :confused:


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Who says people are moving into lower rent accommodation?
    Ray said it.


  • Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    Ray Palmer wrote: »
    Because it didn't reduce the rent costs around. Rents didn't fall the same level. The claim was rent is linked directly with RA. That would mean 10% cut in RA would mean 10% cut in rents. It didn't.

    But as is shown again and again on this forum, Ireland is not one property market. In areas where supply is greater than demand, base rents fell almost exactly in line with the cut in RA. In areas where LLs have potential tenants queuing down the street for a viewing, the cuts had no impact.


  • Registered Users, Registered Users 2 Posts: 8,868 ✭✭✭Ray Palmer


    That's a very, very naive and incorrect understanding of supply and demand. If you increase the cost of bread or cars by 10%, would you expect a 10% fall in demand? :confused:
    Never even suggested that. Go look up the original thread (which you were involved in). People were saying rent was kept up unnaturally by RA and they said everywhere. They and you have suggested a direct link. That would mean 10% cut would have a direct 10% cut in rents. IT SIMPLY ISN'T TRUE AND HAS BEEN PROVEN. Direct means direct and it was nonsense then and is now.
    Ray said it.
    No I didn't look back and you will see I didn't.


  • Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    Ray, how can you argue there is not a direct link, search DAFT for any provincial town and you will find most accommodation is exactly the price of RA for that type of accommodation? I'm not sure how much more the market can be squeezed in these areas, but at the moment LLs are chasing the cuts down.


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  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Ray Palmer wrote: »
    Never even suggested that. Go look up the original thread (which you were involved in). People were saying rent was kept up unnaturally by RA and they said everywhere. They and you have suggested a direct link. That would mean 10% cut would have a direct 10% cut in rents. IT SIMPLY ISN'T TRUE AND HAS BEEN PROVEN. Direct means direct and it was nonsense then and is now.
    Again with the 10% cut in one leading to 10% cut in the other. That's bizarre - can you back up your claim that anyone ever said that? It obviously depends on the elasticity of demand (and also depends on the time horizon).
    Ray Palmer wrote: »
    No I didn't look back and you will see I didn't.
    You said:
    Ray Palmer wrote: »
    All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so
    So unless people are being forced out of places because the cost is now too high and then somehow move into somewhere equally or more expensive...that's what you said, whether you meant to or not.


  • Moderators, Society & Culture Moderators Posts: 32,286 Mod ✭✭✭✭The_Conductor


    Its simple economics really.
    If you reduce rent allowance by 10% (let just say 10% for arguments sake), it does not mean that all rental accommodation is going to fall in price by 10%.
    If the market was not a mixture of private and public accommodation (aka private tenants and those availing of RA and other schemes)- then, yes, there would be a direct correlation- its an indirect elasticity though- precisely because it is a mixed market.

    As alluded to above- many areas are more desirable than other areas- and will have demand from different tenant types. Why would a landlord accept EUR400 from a RA tenant, when a private tenant is willing to pay EUR500, for the exact same property? However if the RA tenant, who still needs to be housed, has his or her budget reduced to EUR360- he or she is forced to move further away, into a less desirable area, reducing demand for Property A- and driving down its rental yield. Where once private tenants might have been willing to pay EUR500- now they're willing to pay EUR450. Obviously this is still of limited, if any, help to the RA tenant- it is however a reduction in the overall rent load.

    Some areas have had larger falls in rent, than have others- and some (very few) areas have in actual fact had increases over the past year. Parts of Meath, Galway city, Inner city Dublin and a few unusual places (rural Cork) have limited supply and a constant demand- and simple economics has determined that their prices have not fallen- or have fallen to a lesser extent than other areas.

    It is an imperfect market- however making blanket statements that an x% reduction in RA should result in an x% reduction in rent for every property in the country- is wishful thinking in the extreme. The overall rent load- is falling and continues to fall. If you want to live in a more desirable area- then tough- you're going to have to accept that you're in competition with everyone else- and competition determines demand.

    If anything- the reductions in RA need to hand-in-hand with a massive scheme to ensure all rental accommodation is up to standard- so there is perception that RA tenants get a worse deal accommodation wise (or a better deal) than anyone else. Until such a time as there are consistent standards adhered to nationally- we will have this perception- rightly or wrongly. RA tenants often feel they don't have the same opportunity to walk as a private tenant has- they do though- and they have the exact same protections- if they are willing to assert them. On the other hand- if they go overboard asserting rights- that private tenants don't- they end up in a situation where a landlord simply isn't interested in renting to them anymore- the paperwork and constant legwork can be the straw that breaks the camel's back.

    There is a direct correlation between RA levels, and rent levels. A correlation does not mean its a 1:1 ratio though- that is the point being made here. If it were purely a RA market- you still wouldn't have your 1:1 ratio- because you'd still have lots of people who wanted to live in Dublin 2, versus a limited few who want to live in Killucan, Co. Meath. Its simple human nature.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    smccarrick wrote: »
    Its simple economics really.
    Unfortunately simple economics and Irish property bulls never really got along very well.


  • Registered Users, Registered Users 2 Posts: 4,306 ✭✭✭Zamboni


    Ray Palmer wrote: »
    Oh please give it up. This is just part of the many reason given before the cut.
    It was said it would not help rents for the vast majority. It was said maybe some would be helped but very few.
    It just didn't happen the way those who said it was keeping rents up said it would.

    Only those marginalised already have suffered. The objective to reduce spending worked but people have suffered. All pointing to it failing to prove the direct link. It just forced people out of where they were living and continues to do so


    Give what up?
    The reason I gave is part of the reason why there is a discrepancy between the goal and the result.
    The landlord who accepts a top up on an RA payment is complicit in exploiting a person who is desperate for accommodation.

    If tenants went into social housing instead of topping up, there would be a far more visible effect on the artificial rental floor.
    If landlords were in some way denied the ability to accept a top up, there would be a far more visible effect on the artificial rental floor.

    So to clarify, there is a direct link - but weak govt controls on its implementation are being abused by complicit landlords and desperate tenants.
    And I blame the state for weak controls - not the landlord or tenant.


  • Registered Users, Registered Users 2 Posts: 836 ✭✭✭uberalles


    I know two couples paying top ups to LLs. Seems to be rife.

    What a country


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan


    smccarrick wrote: »
    Its simple economics really.
    I

    As alluded to above- many areas are more desirable than other areas- and will have demand from different tenant types. Why would a landlord accept EUR400 from a RA tenant, when a private tenant is willing to pay EUR500, for the exact same property? However if the RA tenant, who still needs to be housed, has his or her budget reduced to EUR360- he or she is forced to move further away, into a less desirable area, reducing demand for Property A- and driving down its rental yield. Where once private tenants might have been willing to pay EUR500- now they're willing to pay EUR450.

    How does the RA tenant moving away influence rents in that scenario? The private tenant was willing to pay €500. This was out of the league of the RA tenant and so had no influence on the rent level. The RA tenant moving away changes nothing. If anything it might make the area even more desirable with fewer RA tenants around.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Kosseegan wrote: »
    How does the RA tenant moving away influence rents in that scenario? The private tenant was willing to pay €500. This was out of the league of the RA tenant and so had no influence on the rent level. The RA tenant moving away changes nothing. If anything it might make the area even more desirable with fewer RA tenants around.
    Simple economics. Now the private tenant is not in competition with the RA tenant. Less demand = lower prices.


  • Registered Users, Registered Users 2 Posts: 8,868 ✭✭✭Ray Palmer


    Simple economics. Now the private tenant is not in competition with the RA tenant. Less demand = lower prices.
    Too simple as has been my point that RA is a minor factor. Supply and demand curves include willingness to supply at a given rate. As so many LL don't accept RA very little effect on the market. Higher demand areas this is more previlant.
    So reality is €500 rent never changes as it was never available for RA. The prediction of mass reductions everywhere didn't happen.
    RA availability has decreased as supply reduced to RA. Rents certainly have not reacted as predicted by those championing it. That is all, I understood economics before and since. It's impact was overestimated and the proof is in the market after a year


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan


    Simple economics. Now the private tenant is not in competition with the RA tenant. Less demand = lower prices.

    The private tenant wasn't in competition with the RA tenant in the example. The private tenant was prepared to pay €500 so presumably there were others. If the RA tenant can't compete he has no influence on the €500.
    It must be presumed that if €500 can be got that there would be a reasonable number of private tenants who would emerge in a reasonable time prepared to pay €500. That is the market price. The absence or presence of individuals who cant afford it has no influence and can't have. There is no effect on supply or demand.
    Take an anoliogy with this situation. A hotel can achieve 80% occupancy at €100 a room. Potential guests who can only afford €75 a room go to a nearby B & B. If the B & B guests decide to go to a different area completely what effect does that have on the hotel at €100?
    The answer is nil since they still have the original guests seeking rooms.


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  • Registered Users, Registered Users 2 Posts: 4,044 ✭✭✭Theboinkmaster


    Ray Palmer wrote: »
    As can be seen on threads here and news reports RA wasn't keeping rents up. There were a few people who insisted a reduced RA would mean rents would reduced. Look about it hasn't happened but people are suffering.
    So why didn't it happen?

    That's quite a bold & general statment to make with no supporting evidence at all (internet threads & vested interest media outlets don't count).

    Where is your evidence & data? You have none so why bother starting a thread without it :rolleyes::rolleyes::rolleyes:


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Kosseegan wrote: »
    The private tenant wasn't in competition with the RA tenant in the example. The private tenant was prepared to pay €500 so presumably there were others. If the RA tenant can't compete he has no influence on the €500.
    It must be presumed that if €500 can be got that there would be a reasonable number of private tenants who would emerge in a reasonable time prepared to pay €500. That is the7 market price. The absence or presence of individuals who cant afford it has no influence and can't have. There is no effect on supply or demand.
    Take an anoliogy with this situation. A hotel can achieve 80% occupancy at €100 a room. Potential guests who can only afford €75 a room go to a nearby B & B. If the B & B guests decide to go to a different area completely what effect does that have on the hotel at €100?
    The answer is nil since they still have the original guests seeking rooms.
    Economics is all about marginal behaviour. If the B&B cuts its price to - say - €50, then some of the people who are planning to stay in the hotel will figure it's not worth double the price of the B&B, and will switch to stay there instead. The price cut at the B&B has reduced demand for the hotel. Simple stuff.


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan


    Economics is all about marginal behaviour. If the B&B cuts its price to - say - €50, then some of the people who are planning to stay in the hotel will figure it's not worth double the price of the B&B, and will switch to stay there instead. The price cut at the B&B has reduced demand for the hotel. Simple stuff.


    There is no marginal behaviour in this situation. The hotel guests want a hotel and are willing to pay for it. Until an equivalent hotel comes along they will not switch. The guests paying €100 a night could alwyas have saved by going to the B & B.
    RA tenants being priced out of an area have no effect on those who remain, because those who remain will still be in competition with each other. Once an RA tenant is priced out it may drive up rents in the area he moves to but will have no effeet on the area he has left behind.


  • Registered Users, Registered Users 2 Posts: 3,528 ✭✭✭gaius c


    Meanwhile back in the real world, a definite gap is opening up between apartments and houses in west Dublin 8.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Kosseegan wrote: »
    There is no marginal behaviour in this situation. The hotel guests want a hotel and are willing to pay for it. Until an equivalent hotel comes along they will not switch. The guests paying €100 a night could alwyas have saved by going to the B & B.
    What? So you are saying that in the real world, real people who are looking for accommodation will pay any price to stay in a hotel, and no price for a B&B will tempt them to stay there? Total bullsh!t, I'm sorry. I've made that choice myself only a few weeks ago.

    This is the problem with analogies - people seem to forget that they have to be based on some sort of reality.
    Kosseegan wrote: »
    RA tenants being priced out of an area have no effect on those who remain, because those who remain will still be in competition with each other. Once an RA tenant is priced out it may drive up rents in the area he moves to but will have no effeet on the area he has left behind.
    Nonsense again. Total nonsense. Their movements can drive rents up, but not down? That's actually hilarious if you think about it.


  • Registered Users, Registered Users 2 Posts: 14,403 ✭✭✭✭jimmycrackcorm


    uberalles wrote: »
    I know two couples paying top ups to LLs. Seems to be rife.

    What a country

    I know also of two friends who moved houses albeit still close by with cheaper RA. Seems to be rife.

    I think that's good for the country.


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  • Moderators, Society & Culture Moderators Posts: 32,286 Mod ✭✭✭✭The_Conductor


    gaius c wrote: »
    Meanwhile back in the real world, a definite gap is opening up between apartments and houses in west Dublin 8.

    Yes, and its a widening gap.
    Its a reflection of the simple fact that be built hundreds of thousands of apartments between 1994 and 2007, but damn few houses in comparison. Most people aspire to living in a house with a garden for the kids, however for every 1 house constructed like this in any given area- there could be 20 or even 30 apartments constructed since 1994. If you want to break away from these type statistics- you have to go to comparatively rural areas- where construction of single housing units was rife.

    In short- back to supply and demand. Many, many more people want to live in houses, than do in apartments- and there is a constraint in the supply of houses........


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan



    Nonsense again. Total nonsense. Their movements can drive rents up, but not down? That's actually hilarious if you think about it.

    It is hilarious that you don't understand what you are talking about. A person priced out of a market no longer has any influence in it. If I cant afford a Rolls Royce and go and buy a ford, it has no effect on the price of Rolls Royce. I wasn't bidding anyway. It may have an effect on the proice of ford since in am now increasing demand.


  • Moderators, Society & Culture Moderators Posts: 32,286 Mod ✭✭✭✭The_Conductor


    Kosseegan wrote: »
    It is hilarious that you don't understand what you are talking about. A person priced out of a market no longer has any influence in it. If I cant afford a Rolls Royce and go and buy a ford, it has no effect on the price of Rolls Royce. I wasn't bidding anyway. It may have an effect on the proice of ford since in am now increasing demand.

    Not a good analogy- the supply of Rollsroyces is deliberately constrained to ensure their 'luxury status' (which in an Irish context could be houses with gardens in constraint), versus Ford- who will sell you literally as many units as you desire (apartments). Your apartment price does not vary because of a uptick in demand- whereas the list price of new Rolls- actually increases as their order books are filled........... So.........?


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan


    smccarrick wrote: »
    Not a good analogy- the supply of Rollsroyces is deliberately constrained to ensure their 'luxury status' (which in an Irish context could be houses with gardens in constraint), versus Ford- who will sell you literally as many units as you desire (apartments). Your apartment price does not vary because of a uptick in demand- whereas the list price of new Rolls- actually increases as their order books are filled........... So.........?

    So buying a ford has no reducing effect of Rolls if the purchaser was not going to buy a rolls anyway.

    Thus a tenant priced out of a market segment has no influence on it when he goes for an alternative.

    If there is sufficient demand a manufacturer takes the opportunity to jack up prices. No reason why fords can't do it any more than rolls. It naturally takes more individuals demanding before there would be a noticeable effect.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Kosseegan wrote: »
    It is hilarious that you don't understand what you are talking about. A person priced out of a market no longer has any influence in it. If I cant afford a Rolls Royce and go and buy a ford, it has no effect on the price of Rolls Royce. I wasn't bidding anyway. It may have an effect on the proice of ford since in am now increasing demand.
    What are furiously trying to ignore is that there is not two separate markets for property, one for RA tenants and one for private tenants. There is one market with properties of various standard (and price). You are determined to pretend that no substitution can take place between different properties because your whole argument will fall flat on its face if you do.

    In the real world however, people routinely choose between a nice property in a more distant suburb and a grottier one in a nice area at similar prices, or choose to live with others because it's half the cost of living alone, or to move further away from a city to get a garden for the kids etc. etc..

    Meanwhile, you try to pretend that your 'two market' model exists in the real world and one market never affects the other. Ridiculous.


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  • Registered Users, Registered Users 2 Posts: 3,528 ✭✭✭gaius c


    smccarrick wrote: »
    Yes, and its a widening gap.
    Its a reflection of the simple fact that be built hundreds of thousands of apartments between 1994 and 2007, but damn few houses in comparison. Most people aspire to living in a house with a garden for the kids, however for every 1 house constructed like this in any given area- there could be 20 or even 30 apartments constructed since 1994. If you want to break away from these type statistics- you have to go to comparatively rural areas- where construction of single housing units was rife.

    In short- back to supply and demand. Many, many more people want to live in houses, than do in apartments- and there is a constraint in the supply of houses........

    Small sample size I know but a two bed apartment for the price you would have paid for a one bed last year.
    www.daft.ie/21283875

    What may change that dynamic is people who would like to live in houses but can't afford to. Long way to go before any sort of market stability yet.


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan



    In the real world however, people routinely choose between a nice property in a more distant suburb and a grottier one in a nice area at similar prices, or choose to live with others because it's half the cost of living alone, or to move further away from a city to get a garden for the kids etc. etc..

    What i am talking about is where people don't have a choice because they cant afford it. Once they are priced out, they are out. It is one market with may segments. If you are out of a segment of the market you can't influence it.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Kosseegan wrote: »
    What i am talking about is where people don't have a choice because they cant afford it. Once they are priced out, they are out. It is one market with may segments. If you are out of a segment of the market you can't influence it.
    Just wrong, wrong, wrong. If the lower end of the market experiences price falls (and you seem to accept that it can) then people who can afford the more expensive end of the market can be tempted into the cheaper property as they prefer to use the money they save on something else (savings, lifestyle, education, whatever).

    Substitution occurs. Exactly the same as the person who opts for the B&B and an expensive dinner instead of a hotel and a Big Mac.


  • Banned (with Prison Access) Posts: 987 ✭✭✭Kosseegan


    Just wrong, wrong, wrong. If the lower end of the market experiences price falls (and you seem to accept that it can) then people who can afford the more expensive end of the market can be tempted into the cheaper property as they prefer to use the money they save on something else (savings, lifestyle, education, whatever).

    Substitution occurs. Exactly the same as the person who opts for the B&B and an expensive dinner instead of a hotel and a Big Mac.

    That is people who can afford it affecting the market. i am talking about people who can't afford it.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Kosseegan wrote: »
    That is people who can afford it affecting the market. i am talking about people who can't afford it.
    You appeared to be claiming that cutting rent allowance cannot affect rents for the more expensive properties.
    Kosseegan wrote: »
    How does the RA tenant moving away influence rents in that scenario? The private tenant was willing to pay €500. This was out of the league of the RA tenant and so had no influence on the rent level. The RA tenant moving away changes nothing.
    I have demonstrated that it can.


  • Registered Users, Registered Users 2 Posts: 8,184 ✭✭✭riclad


    Well in many areas of dublin ,ra is irrelevant as average rent is above ra limits.
    or in estates theres few flats take take ra tenants ,only ra tenants are single mothers renting houses .


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    riclad wrote: »
    Well in many areas of dublin ,ra is irrelevant as average rent is above ra limits.
    or in estates theres few flats take take ra tenants ,only ra tenants are single mothers renting houses .
    AAAAGHGHGHGHG

    It's very relevant, as I have just spent half a dozen posts explaining.

    Edit: actually, that's an over-reaction on my part - RA levels won't have a huge impact on rents in the nicest areas, certainly not in the short term.


  • Registered Users, Registered Users 2 Posts: 8,868 ✭✭✭Ray Palmer


    So the claim is rent is going lower as demand decreases because RA reduction lower demand on the overall market.
    What is being ignored is RA is not accepted by many LL before and has decreased since. Supply to RA has reduced. Demand for RA accepting property has increased. No movement on price payable as would be natural.
    In theory this means more property supplied to private renters as former RA properties are now only abilible to them.

    Factors ignored would be
    1 people upgrading due to too many RA tenants near by
    2 the limit at which property will be provided. Ie LL refusing to lower rent
    3 the effect of RA reduction hasn't been demonstrated in the real world

    I know the theory but by ignoring real world application the point is the theory hasn't been proved but disproved. Main reasons are ignoring all the real factors.

    A very negligible difference has been made and almost none in the highly populated areas with the majority of rental property.


  • Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    Ray Palmer wrote: »
    So the claim is rent is going lower as demand decreases because RA reduction lower demand on the overall market.
    What is being ignored is RA is not accepted by many LL before and has decreased since. Supply to RA has reduced. Demand for RA accepting property has increased. No movement on price payable as would be natural.
    In theory this means more property supplied to private renters as former RA properties are now only abilible to them.
    True WRT some landlords not accepting RA tenants, but enough do to ensure that we are still looking at one market. Imagine if 50% of hotels would not accept RA people booking rooms - the 50% who do accept them are plenty to ensure that a single market exists.
    Ray Palmer wrote: »
    Factors ignored would be
    1 people upgrading due to too many RA tenants near by
    2 the limit at which property will be provided. Ie LL refusing to lower rent
    3 the effect of RA reduction hasn't been demonstrated in the real world
    So landlords would rather leave their property empty than rent it out for lower levels of rent? :confused: I can't see that plan panning out very well, especially if they have mortgages on the property.

    Also, you have yet to explain why rents have fallen for about two thirds of the population in 98% of the land area in the country according to the DAFT rental report.
    Ray Palmer wrote: »
    I know the theory but by ignoring real world application the point is the theory hasn't been proved but disproved. Main reasons are ignoring all the real factors.

    A very negligible difference has been made and almost none in the highly populated areas with the majority of rental property.
    You keep claiming it has been disproved when the data clearly shows that rents have fallen for most people in most of the country. In what sense does that disprove the theory? :confused:


  • Registered Users, Registered Users 2 Posts: 18,979 ✭✭✭✭murphaph


    Just wrong, wrong, wrong. If the lower end of the market experiences price falls (and you seem to accept that it can) then people who can afford the more expensive end of the market can be tempted into the cheaper property as they prefer to use the money they save on something else (savings, lifestyle, education, whatever).

    Substitution occurs. Exactly the same as the person who opts for the B&B and an expensive dinner instead of a hotel and a Big Mac.
    I've said it before-it's all regional and the effects are drastically different on Achill Island than in Dublin, but IMO (in Dublin) the "cheap and nasty" end of the market is now seeing increasing prices as RS recipients can't afford to compete with private paying tenants for "decent" accommodation.

    I'm not arguing the merits of the policy...I am a taxpayer and understand that RS needed reducing, but the government did call it incorrectly when they thought they could "steer" rents in general by changing their rates. In certain regions they can, but generally not in Dublin as the demand for rentals is strong there still (likely not the case in your average midlands town, no disrespect).

    I just know what I know "from the coal face". My tenants will not be able to afford their home/my house from January 2013 when their RS is to be suspended (if they haven't found somewhere else to live). They will not be able to afford any 2 bed property (they are strictly speaking "over accommodated" in my 3 bed place) in the area (D15, not the most expensive in Dublin by a long stretch). I honestly don't know what they will do with a kid in school nearby. Even the one beds that are in budget (775 max) do not accept RS for the most part as LLs are getting increasingly fed up with delayed payments and so on.

    I'm desperately trying to get my house under the RAS scheme for my tenants' sake because I have a feckin' heart, but I'm not St. Vincent dePaul: I can't reduce to 775 when average rates for the type of property are 900 MINIMUM, and heading northwards again.


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