Rental prices in Dublin's RPZs - how did we get here?

papapete

Here's a brain teaser for you!

Looking at renting a one-bed apartment in Dublin's city centre recently, I found that the average rent was around €1,500. This means that the average rent in this area in 2016 (when Dublin became subject to Rent Pressure Zone rules) must have been €1,333 (that is, €1,500 discounted back to 2016, 4% a year).

Strangely, I don't remember paying €1,333 for my one bed in 2016!

In any event, surely lots of properties in 2016 were not at the average rent and, therefore, would have been left behind when the RPZs came in and would now be languishing well below the €1,500 mark.

Any comments on how to solve this really tough brain teaser?

Thanks.

cfingers

what is the question?

During a discussion on The Tonight Show a couple of weeks ago, Matt Cooper said rents have risen an average of 14% in Dublin in the last 12 months, the reasons, LLs ignoring RPZ rules coupled with tenants willingness to pay above allowed limit in order to secure a property.

Fian

papapete wrote: »

Here's a brain teaser for you!

Looking at renting a one-bed apartment in Dublin's city centre recently, I found that the average rent was around €1,500. This means that the average rent in this area in 2016 (when Dublin became subject to Rent Pressure Zone rules) must have been €1,333 (that is, €1,500 discounted back to 2016, 4% a year).

No, you found that the average price of advertised properties is €1500. You don't have the data to establish the average price of all ongoing tenancies, and neither do daft.ie by the way.

The tenancies which feed into that are new tenancies (which can be rented at market rates without any 4% calculations) and tenancies which tenants have moved out of. You can be pretty sure that tenants are not rushing to move out tenancies well below the market rate.

So your calculation is absolutely not valid, you can't extrapolate back the average rent in 2016 from the average advertised rent today.

As regards the anecdotal recollection of your rent though - I had a one bed let at 1250 in early 2014, then frozen by legislation for 2 years by which time the RPZ rules came in. Would still be below €1500 now, but not by much and only because of the 27 months for which 2% rather than 4% applied (the first increase).

voluntary

How many landlords have been fined for breaching the RPZ rules to date? Zero?

Amirani

papapete wrote: »

Looking at renting a one-bed apartment in Dublin's city centre recently, I found that the average rent was around €1,500. This means that the average rent in this area in 2016 (when Dublin became subject to Rent Pressure Zone rules) must have been €1,333 (that is, €1,500 discounted back to 2016, 4% a year).

This doesn't really make any sense as a piece of analysis. The population of properties in the Dublin rental market is quite different to what it was in 2016; new properties added and many removed from the private rental sector. There are going to be other factors to consider, but this will distort your analysis more than anything else.

Trying to apply a blunt discount to the current average to compare with 2016 is pointless.

Claw Hammer

voluntary wrote: »

How many landlords have been fined for breaching the RPZ rules to date? Zero?

A number have had to pay back rent as well as compensating tenants.

voluntary

Claw Hammer wrote: »

A number have had to pay back rent as well as compensating tenants.

Well, my undestanding is that the level of abuse in this field is quite large but numbers convicted very, very low. Hence the temptation to ignore the limitations by some landlords.

dancingqueen

Fian wrote: »

The tenancies which feed into that are new tenancies (which can be rented at market rates without any 4% calculations) and tenancies which tenants have moved out of. You can be pretty sure that tenants are not rushing to move out tenancies well below the market rate.

Incorrect. Landlords have to provide documentation to a new tenant showing the date and amount of last rent set and calculation. The maximum increase here is 4% per 12 months.

https://onestopshop.rtb.ie/beginning-a-tenancy/setting-rent/new-tenancies/

GGTrek

papapete wrote: »

Rental prices in Dublin's RPZs - how did we get here? papapete

Your simple question requires a simple answer in my opinion: we got there due to the Irish politicians and their accomplices "the sold out Irish media" full frontal attack on small to medium landlords and their stupid nimby prone planning laws (especially the building regs issued in 2012 in the middle of the crisis were beautiful fantasy regs which have only recently been reversed) which caused a reduction in supply of rental property that is still going on and guess what: price controls (the politicians really believe they are smart a..es and economics 101 laws do not apply to their socialist fantasies :D:D), further exacerbated reduction of supply (again classic economic 101 prediction) and there was no reduction in demand since there is plenty of employment in Ireland compared to other countries: surprise, surprise! prices went up!


You can present your calcs to the sorry ears of the govvie friends at Threshold BTW and they will surely provide a shoulder to cry on:D.


Notice that a lot of the new builds, unless of course they are bought by real estate funds which pay zero tax, are not for the rental market anymore since vey few people will think about renting out their properties nowadays, given the enourmous uncertainty over the de facto expropriation plans of the Irish politicians though further regulations that have already been announced by the head Smurf :pac:.

dudara

dancingqueen wrote: »

Incorrect. Landlords have to provide documentation to a new tenant showing the date and amount of last rent set and calculation. The maximum increase here is 4% per 12 months.

https://onestopshop.rtb.ie/beginning-a-tenancy/setting-rent/new-tenancies/

This might have to, but how many actually do? And even if tenants know about this, they may not ask for it for fear of not securing the property.

Saudades

papapete wrote: »

Looking at renting a one-bed apartment in Dublin's city centre recently, I found that the average rent was around €1,500. This means that the average rent in this area in 2016 (when Dublin became subject to Rent Pressure Zone rules) must have been €1,333 (that is, €1,500 discounted back to 2016, 4% a year).

Strangely, I don't remember paying €1,333 for my one bed in 2016!

The average rent of a one-bed apartment in Dublin's city centre is actually a lot higher than €1,500 - it's €1,718 according to Daft's 2019 Q1 report. (That's using D1 and D2 figures for simplicity).

The average rent of a one-bed apartment in Dublin's city centre for 2016 Q1 was €1,297.

Those average figures are likely skewed though due to the amount of luxury apartments available for more than €3,500 a month - which I can only assume are short to medium term lets for tourists and business people?

But nevertheless, around 32.4% (€421) increase in 3 years, broken down -

15.8% increase from 2016 Q1 to 2017 Q1;
10.3% increase from 2017 Q1 to 2018 Q1;
And a 3.7% increase from 2018 Q1 to 2019 Q1 which falls more inline with the 4% RPZ increases.

DubCount

RPZ only controls existing rental properties. It also creates an imbalance between supply and demand as the general level of prices cannot move to create balance. This means new landlords entering the market (mostly institutional investors) create inflation well above 4% because of this market imbalance. In effect, the protection of existing tenancy prices, pushes up the price for new rental properties. As very few tenants are leaving tenancies, except where landlord is leaving the market altogether, its mostly new entrants that are being advertised. There may be some inflation caused by rogue landlords breaking rules or using loopholes, but RPZs naturally create inflation for new tenants even if they were rigidly enforced.

Graham

Saudades wrote: »

The average rent of a one-bed apartment in Dublin's city centre is actually a lot higher than €1,500 - it's €1,718 according to Daft's 2019 Q1 report. (That's using D1 and D2 figures for simplicity).

Aren't the DAFT rental reports based on asking rents for properties advertised during the period, rather than being representative of overall average rents for an area?

Fian

dancingqueen wrote: »

Incorrect. Landlords have to provide documentation to a new tenant showing the date and amount of last rent set and calculation. The maximum increase here is 4% per 12 months.

https://onestopshop.rtb.ie/beginning-a-tenancy/setting-rent/new-tenancies/

You misunderstand. The point I am making is that assuming that landlords fully obey the restrictions (and tbh i think most do, but the ones doing so will not be newsworthy) since tenants will be reluctant to move out of very cheap tenancies those are going to be less likely to be advertised. It means the advertised rents are going to be biased towards the most expensive end and tenancies which are restricted to a low rent are less likely to show up on daft.

Essentially i am making the point that you can't extrapolate from advertised prices on daft back to average rents in 2016 and conclude that the RPZ rules are being flouted in a widespread way as the OP appears to be implying.

voluntary

Are new rents still increasing or have they stabilised?

Graham

I would guess they're still increasing.

Landlords will mostly be applying the 4% increases and new properties, largely delivered by REITs will generally be at the higher end of the market.

lcwill

Fian wrote: »

You misunderstand. The point I am making is that assuming that landlords fully obey the restrictions (and tbh i think most do, but the ones doing so will not be newsworthy) since tenants will be reluctant to move out of very cheap tenancies those are going to be less likely to be advertised. It means the advertised rents are going to be biased towards the most expensive end and tenancies which are restricted to a low rent are less likely to show up on daft.

Essentially i am making the point that you can't extrapolate from advertised prices on daft back to average rents in 2016 and conclude that the RPZ rules are being flouted in a widespread way as the OP appears to be implying.

All my new tenancies since the RPZ have had the rental calculation compared to the previous rent literally spelled out within the contract i.e. previous rent for previous tenant was X , set on date Y , multiplied by whatever, and the new rent =

Hard to get more transparent then that - this is the company managing the tenancies that does this so I assume it it is fairly standard across the rental management companies in Dublin.

I wish I was averaging 1500 for a 1 bed. Need to consider legacy tenancies in this though, with rent set long ago and unable to increase. Not many of these coming on the market as tenants see they are getting a good deal. And when they do become vacant they are let out to known good tenants from waiting lists, not advertised on Daft as you would get hundreds of enquiries as soon as you advertise something decent with cheap rent.

maxsmum

I live in Dublin city centre.
Our parents loaned us the money for our deposit. They were paid back in full but it was still a huge advantage for which we are so grateful.
House prices on our road haven't changed much. However I looked on daft there as one came up for rent.
It's 2700 per month.
Our mortgage is 1600 per month.
It makes me sick to think that, but for our parents being able to help us out when we needed it, we'd be paying that and have nothing in savings towards a deposit.
I've no idea what's gone wrong in economic terms but there's just something so wrong about that. I'm not saying 100% mortgages should be brought back but Jesus it must be tough saving for a deposit these days.

voluntary

Graham wrote: »

I would guess they're still increasing.

Landlords will mostly be applying the 4% increases and new properties, largely delivered by REITs will generally be at the higher end of the market.

Yeah, a meaningful statistic would only show new properties coming into a rental market month over month or quarter over quarter, excluding the already rented /restricted by rpz.

Otherwise it's hard to tell if rents are still increasing, or is it only that the average increases as the left behind properties are trying to catch up.

sk8board

voluntary wrote: »

Are new rents still increasing or have they stabilised?

The OP has missed the point that the 4% increases are for existing tenants.

New rental leases are just that, new.

Incidentally my business partner told me yesterday that his REIT controlled apartment is getting a 2% increase annually now (4% every 2 years for sitting tenants).
This allows the REIT to compound the increase, which as an LL myself is something I think is missing from the legislation - if I don’t increase the rent for e.g. 5 years, the 4% is calculated off the last rent set, and isn’t compounded Year on year. I can’t in all honesty do what the REITs are, but I know why they do it.

Assetbacked

maxsmum wrote: »

I live in Dublin city centre.
Our parents loaned us the money for our deposit. They were paid back in full but it was still a huge advantage for which we are so grateful.
House prices on our road haven't changed much. However I looked on daft there as one came up for rent.
It's 2700 per month.
Our mortgage is 1600 per month.
It makes me sick to think that, but for our parents being able to help us out when we needed it, we'd be paying that and have nothing in savings towards a deposit.
I've no idea what's gone wrong in economic terms but there's just something so wrong about that. I'm not saying 100% mortgages should be brought back but Jesus it must be tough saving for a deposit these days.

I don't know how a young family can work and rent a house. If they can afford the rent, they probably can't save. Separately, so many adults cannot afford to live by themselves in their own place, others can't even afford to share so live at home; while other adults share bedrooms like students. The worry and stress the uncertainty of this situation causes is demoralising to the point it is a massive social cost of this "growth" we hear so much about and are told is good for Ireland. A catastrophic situation, truly.

elizunia87

maxsmum wrote: »

Jesus it must be tough saving for a deposit these days.

I agree
Lucky we do pay only small amount for 1 bedroom apt but this is a very very old place with the dump. We pay so low, as it is a friend's house so we are saving like crazy now. If we have to move out now, we would have to pay around 2000k for the house. Crazy.

We live on 400€ (+ Rent) a month with my Husband and the rest is going towards the saving account. We do not go out, do not eat out, just 3 days of holiday abroad this year.
We saved 40k, in around 1.5 year. It is possible but fr* hard

Fian

sk8board wrote: »

The OP has missed the point that the 4% increases are for existing tenants.

New rental leases are just that, new.

Incidentally my business partner told me yesterday that his REIT controlled apartment is getting a 2% increase annually now (4% every 2 years for sitting tenants).
This allows the REIT to compound the increase, which as an LL myself is something I think is missing from the legislation - if I don’t increase the rent for e.g. 5 years, the 4% is calculated off the last rent set, and isn’t compounded Year on year. I can’t in all honesty do what the REITs are, but I know why they do it.

That is a bit foolish of the Reit. It is open to them to increase the rent by 4% annually, assuming they remain below market rates. it is 4% every year that is permitted in an RPZ.

Varik

Fian wrote: »

That is a bit foolish of the Reit. It is open to them to increase the rent by 4% annually, assuming they remain below market rates. it is 4% every year that is permitted in an RPZ.

Think it may be just the first review those existing tenants are getting, rest would be on 4%.

sk8board

Fian wrote: »

That is a bit foolish of the Reit. It is open to them to increase the rent by 4% annually, assuming they remain below market rates. it is 4% every year that is permitted in an RPZ.

Common misconception - it’s 2% per year for a sitting tenant, and 4% for a new lease. If they apply it every year, they get the compound effect.

Fian

sk8board wrote: »

Common misconception - it’s 2% per year for a sitting tenant, and 4% for a new lease. If they apply it every year, they get the compound effect.

No you are mistaken.

It was 2% per annum for the first review for existing leases when the new legislation came in. It is and was 4% for sitting tenants after that first review.

For new leases it was 4% per annum from the get go.

The 2% arises only where you put 24 under the line as M in the formula.

The legislation is clear:

(4) Subject to subsection (5), in setting, at any particular time, the rent under a tenancy of a dwelling in a rent pressure zone, an amount of rent shall not be provided for that is greater than the amount determined by the formula—

R x (1 + 0.04 x t/m)

where—

m is—

(a) 24, where section 24C(1)(a) applies, or

(b) 12, in any other case,.....

And 24C(1)(a):

24C. (1) Where a tenancy commenced before the relevant date (within the meaning of section 19(7)) and the area in which the tenancy is situated is in a rent pressure zone (within the meaning of that section), then—

(a) the first rent review after the relevant date shall be carried out in accordance with section 20, and

sk8board

Fian wrote: »

No you are mistaken.

It was 2% per annum for the first review for existing leases when the new legislation came in. It is and was 4% for sitting tenants after that first review.

For new leases it was 4% per annum from the get go.

The 2% arises only where you put 24 under the line as M in the formula.

The legislation is clear:



And 24C(1)(a):

what I mean is that the REIT will jump in with the first review immediately, while other LLs, myself included, mightn’t review the rent on a good sitting tenant for years

Claw Hammer

voluntary wrote: »

Are new rents still increasing or have they stabilised?

Rents for established rentals are stabilising. A few luxury properties hit the headlines but common or garden properties are not seeing the queues. September might tell a story however.