Dublin - Significant reduction in rents coming?

Ozark707

C14N wrote: »

It's due to the fact that demand still greatly outstrips supply and many rents are kept far below market rate by the RPZ rules. If a place is being rented out for €1700, but the free market price would actually be, say €2100, then even if competition from new builds around it brings its theoretical equilibrium price down to €2000, the landlord will still be pushing the prices up until it reaches that rate. They'll only stop putting the rents up when they think they're hitting a number that no tenant will be willing to pay.

There is probably two distinct markets at play so. The one where demand is outstripping supply where a 2 bed is <2.1k or so but the second market is where 2 beds are priced in of 2.5k and which languish on the market. The question is now how long the second market will continue to operate as it is doing. I would be surprised even after many return to the office that the dial will move massively on it.

SortingYouOut

Quick one for people, my landlord has increased the rent by €50 in total in the last 5 years (RPZ). What is it that would make him not want to take full advantage of this 4% per year allowance? I'm just always worried that he'll turn around some day and hit me with something loop hole that will have us out on our arse but nothing yet..

alias no.9

SortingYouOut wrote: »

Quick one for people, my landlord has increased the rent by €50 in total in the last 5 years (RPZ). What is it that would make him not want to take full advantage of this 4% per year allowance? I'm just always worried that he'll turn around some day and hit me with something loop hole that will have us out on our arse but nothing yet..

Some landlords value good tenants vs rolling the dice for a small incremental increase, half of which goes to the taxman anyway.

The date of the €50 increase is now the reference for any future increase rather than the start of the tenancy so max 4% per year from that date and from the rent set on that date, there is no facility to to catch up on not maximising the increase at that time.

SortingYouOut

alias no.9 wrote: »

Some landlords value good tenants vs rolling the dice for a small incremental increase, half of which goes to the taxman anyway.

The date of the €50 increase is now the reference for any future increase rather than the start of the tenancy so max 4% per year from that date and from the rent set on that date, there is no facility to to catch up on not maximising the increase at that time.

So could he throw the rent up in one big hike to make up for the lost years? Not that he would but we're now paying about 500-700 less than those in the same complex. We're good tenants and never miss rent but that's some money he's missing out on. Maybe he's just not hungry and prefers the stability but I'm thankful anyway.

alias no.9

SortingYouOut wrote: »

So could he throw the rent up in one big hike to make up for the lost years? Not that he would but we're now paying about 500-700 less than those in the same complex. We're good tenants and never miss rent but that's some money he's missing out on. Maybe he's just not hungry and prefers the stability but I'm thankful anyway.

If he had not reviewed the rent in 5 years, he could increase by 4% per year for the 5 years to catch up but since he reviewed it at some point in between, that's now the reference for any future increase, so if that was 2 years ago, he would be limited to 4‰ per year for 2 years.

C14N

Ozark707 wrote: »

There is probably two distinct markets at play so. The one where demand is outstripping supply where a 2 bed is <2.1k or so but the second market is where 2 beds are priced in of 2.5k and which languish on the market. The question is now how long the second market will continue to operate as it is doing. I would be surprised even after many return to the office that the dial will move massively on it.

I think to the extent that some are priced at 2.5k+ and being left vacant, it's an issue of it being kept above market rate for fear of getting locked into the lower price for years if it drops to a market rate. Demand in Dublin went down over the past year with many people who were immigrant workers or who just moved to Dublin from outside the city moving out (either back to their home countries or to the countryside). If you either lost work or were able to work from home, for a lot of people it didn't make any financial sense to stay paying Dublin rents when you knew you could be out for a long time.

In a totally free market, it's in the interest of LLs to just drop prices enough to fill the vacancies, but many assumed this would be a temporary drop, and you aren't going to want to follow market rates downward when you know it will take years to follow them back up again. If we do find that it's a long term change though and they don't start coming back up, at some point those expensive ones will have to be let out too, which will mean dropping the price at least somewhat.

SortingYouOut wrote: »

So could he throw the rent up in one big hike to make up for the lost years? Not that he would but we're now paying about 500-700 less than those in the same complex. We're good tenants and never miss rent but that's some money he's missing out on. Maybe he's just not hungry and prefers the stability but I'm thankful anyway.

I can only assume he just doesn't want to take the risk of losing you. I've had family who were LLs (holding onto family homes to rent out after trading up) and you can really get stuck with some tenants from hell who are impossible to evict. Sometimes it's not worth taking that gamble for them if the amount they're charging is already a good enough profit from them. Some of them just aren't really attentive to the market and squeezing every penny. They had a house or apartment and as long as it's making the money to pay the mortgage they don't really care enough to try and figure out how much they could optimally be charging.

I don't know when he did the €50 increase, but he can legally increase it cumulatively from that point. The formula is

4% x (months since last increase / 12)

With the condition that there also have to be at least 12 months between increases. So if the last increase was 12 months ago, he could stick it up by another 4% now. If the last increase was 48 months ago, he could, legally, go up by as much as 16%.

JimmyVik

C14N wrote: »

I think to the extent that some are priced at 2.5k+ and being left vacant, it's an issue of it being kept above market rate for fear of getting locked into the lower price for years if it drops to a market rate. Demand in Dublin went down over the past year with many people who were immigrant workers or who just moved to Dublin from outside the city moving out (either back to their home countries or to the countryside). If you either lost work or were able to work from home, for a lot of people it didn't make any financial sense to stay paying Dublin rents when you knew you could be out for a long time.

I think they REITs will probably be waiting for the councils to pay extortionate bulk rents for all the empties they have now. Might as well keep them empty and wait until that happens.
If the council dont swoop in then come autumn they will easily rent them at high rents.

Ozark707

JimmyVik wrote: »

I think they REITs will probably be waiting for the councils to pay extortionate bulk rents for all the empties they have now. Might as well keep them empty and wait until that happens.
If the council dont swoop in then come autumn they will easily rent them at high rents.

Many of the expensive ones I see on daft (e.g. Capital Docks) were at the same prices pre covid so they were unable to let them then. It will be interesting to see what happens there. Personally I don't see those being let unless they bring the prices down.

I know someone who recently secured 25% off the last rental price down in the docklands for a very high spec place. Now it had been vacant for something like 6 months and it was a private LL so the missing 20k in rent was too deep a hole so they had to substantially drop the price.

Amadan Dubh

Have been on Daft and I have never realised there were so many short lets in Dublin 2 and Dublin 4 in older buildings. These must have been the apartments taken by people moving over and looking to get on their feet but are now vacant for what is probably going to be long term vacancy (greater than one year). Not sure where this talk of autumn for a recovery is coming from, I don't see any dramatic change to WFH policy for big companies in Ireland until the start of 2022, from my discussion with some friends.

If you search in the "Share" category, you get 3,371 properties (note; properties, not rooms!) available. There is also a ridiculous amount of student accommodation newly built sitting empty. The rule for vacancy taxes should be that it applies if you have advertised the property for rent and no tenancy has been registered with the RTB in the last 6 months.

Can't rent it? Reduce the asking rent. Still can't rent? Pay a vacancy tax. Don't want to pay vacancy tax? Sell up.

C14N

Ozark707 wrote: »

Many of the expensive ones I see on daft (e.g. Capital Docks) were at the same prices pre covid so they were unable to let them then. It will be interesting to see what happens there. Personally I don't see those being let unless they bring the prices down.

I wonder about that too. I get a lot of ads online for very nice looking new apartments in Dublin, and whenever I look at them the prices are generally very high. Like €1800+ for 1-beds, €2600+ for 1-beds, that kind of thing. Just given the amount of them and the prices I really have to wonder how there is enough of a market to pay for them. I just really wonder who is the type of person this is aimed at. You'd need to be taking home around €80k-90k a year for a 1-bed like that to be affordable, and it's just hard to imagine someone on that kind of money wanting to live in a 1-bed apartment.

Amadan Dubh

C14N wrote: »

I wonder about that too. I get a lot of ads online for very nice looking new apartments in Dublin, and whenever I look at them the prices are generally very high. Like €1800+ for 1-beds, €2600+ for 1-beds, that kind of thing. Just given the amount of them and the prices I really have to wonder how there is enough of a market to pay for them. I just really wonder who is the type of person this is aimed at. You'd need to be taking home around €80k-90k a year for a 1-bed like that to be affordable, and it's just hard to imagine someone on that kind of money wanting to live in a 1-bed apartment.

The rationale, as I understand it, is to be able to hike up the book value of the property (I think this is what was posted in these forums before) if you set the rent at a certain level, even if the building lies empty.

I think they price it at a certain level which they know people can't pay as this is a way to starve the market of supply but by not technically hoarding the property.

Jmc25

C14N wrote: »

I wonder about that too. I get a lot of ads online for very nice looking new apartments in Dublin, and whenever I look at them the prices are generally very high. Like €1800+ for 1-beds, €2600+ for 1-beds, that kind of thing. Just given the amount of them and the prices I really have to wonder how there is enough of a market to pay for them. I just really wonder who is the type of person this is aimed at. You'd need to be taking home around €80k-90k a year for a 1-bed like that to be affordable, and it's just hard to imagine someone on that kind of money wanting to live in a 1-bed apartment.

Yes, it's the sheer volume of them that makes me wonder do we have a supply shortage at all any more? If these were priced at mid market levels they'd be filled no problem. But then what about the crap paper thin 2005 Celtic Tiger fire hazard death traps that currently occupy the mid market? I'd imagine the demand would no longer be there for them, at least at the usual 1800 to 2100 per month that they're currently being rented at. And so on down the market all the way down to houseshares.

As for the chances of an autumn revival where suddenly all those mystery 100k per year people who want to rent an apartment rather than buying a house even though apparently they've been living back at home with the parents and presumably saved a huge amount of money over the last year magically appearing out of the woodwork, well I just don't buy it. It sounds like "soft landing" kind of talk to me.

That said if the high end places don't lower the prices in autumn then there probably will be a surge in demand at the lower and mid levels of the market.

C14N

Amadan Dubh wrote: »

The rationale, as I understand it, is to be able to hike up the book value of the property (I think this is what was posted in these forums before) if you set the rent at a certain level, even if the building lies empty.

I think they price it at a certain level which they know people can't pay as this is a way to starve the market of supply but by not technically hoarding the property.

How does that work out though? When do they eventually cash out and make some money on this? Most of these are fairly newly built, which means someone paid probably a lot of money for the labour and materials to put them in there, which are now depreciating while left vacant and earning no revenue. If you just wanted to buy an asset to hold onto and hope the value increases, seems like you'd be better served by just buying older properties or vacant land plots, since it's the land underneath that is going to increase in value over time.

The value of a property like that is really its ability to pull in rental income, if it's never going to actually do that then it's just a bubble that can't maintain its value forever.

The Student

C14N wrote: »

How does that work out though? When do they eventually cash out and make some money on this? Most of these are fairly newly built, which means someone paid probably a lot of money for the labour and materials to put them in there, which are now depreciating while left vacant and earning no revenue. If you just wanted to buy an asset to hold onto and hope the value increases, seems like you'd be better served by just buying older properties or vacant land plots, since it's the land underneath that is going to increase in value over time.

The value of a property like that is really its ability to pull in rental income, if it's never going to actually do that then it's just a bubble that can't maintain its value forever.

I suspect the properties are not been let for lower rates because of the RPZ. Nobody really knows how the WFH is actually going to play out.

So why would you drop the rent just to get someone in and then be subject to the RPZ for years to come. Remember these funds have cash on hand so don't have interest charges or need to make repayments etc so they can sit on vacant properties for some time (how long that will be remains to be seen).

Ironically if the Govt actually stopped interfering in the market rents would find their market rate. If supernormal profits are being earned then new entrants are attracted to the market to share in these profits.

So more supplies leads to lower prices.

The question remains why more supplies don't come on line if so much profits are available?

Marius34

C14N wrote: »

I wonder about that too. I get a lot of ads online for very nice looking new apartments in Dublin, and whenever I look at them the prices are generally very high. Like €1800+ for 1-beds, €2600+ for 1-beds, that kind of thing. Just given the amount of them and the prices I really have to wonder how there is enough of a market to pay for them. I just really wonder who is the type of person this is aimed at. You'd need to be taking home around €80k-90k a year for a 1-bed like that to be affordable, and it's just hard to imagine someone on that kind of money wanting to live in a 1-bed apartment.

I know number of people who where "paying" over 2600Eur for apartment. Those were company renting out for overseas employees, or contractors, paying in the form of expenses. But that's only mine experience.
It was expected that many oversee employees would return by the end of last year, but apparently many didn't, or rented out further from city center, as there is no much point to stay in city center during lockdown.

C14N

Marius34 wrote: »

I know number of people who where "paying" over 2600Eur for apartment. Those were company renting out for overseas employees, or contractors, paying in the form of expenses. But that's only mine experience.
It was expected that many oversee employees would return by the end of last year, but apparently many didn't, or rented out further from city center, as there is no much point to stay in city center during lockdown.

So you're saying that the demand for these is at least in part from multinationals who will give it to international employees as a sort of benefit in kind?

yagan

The way to look at the new vertical ghost estates is that they're essentially subprime, but the institutions that bought these tranches of rental properties either don't know it yet or they've stopped buying.

C14N

yagan wrote: »

The way to look at the new vertical ghost estates is that they're essentially subprime, but the institutions that bought these tranches of rental properties either don't know it yet or they've stopped buying.

Do you have any examples of apartment blocks that are "vertical ghosts"?

yagan

C14N wrote: »

Do you have any examples of apartment blocks that are "vertical ghosts"?

I haven't been near the city since the first site shut down, the apartment complex I had been involved with remains a shuttered site. I'm not mentioning any names as too close to my personal work but from other colleagues the push is on to get what was near completion to market ASAP.

It all feels very similar to conditions around late 06/early 07.

Amadan Dubh

Get those social leases with the councils before the crash comes, where possible, is the aim of the game for the investors. Getting 90% of the supposed market value rent secured is better than what potentially is coming, which is populist, anti-investor policies, where 90% of current market rents will look lucrative.

yagan

Amadan Dubh wrote: »

Get those social leases with the councils before the crash comes, where possible, is the aim of the game for the investors. Getting 90% of the supposed market value rent secured is better than what potentially is coming, which is populist, anti-investor policies, where 90% of current market rents will look lucrative.

Front load the bailout before anyone realises, but they didn't factor on the international fund outbidding them on their own weeze.

Marius34

C14N wrote: »

So you're saying that the demand for these is at least in part from multinationals who will give it to international employees as a sort of benefit in kind?

Yes, at least partially, I'm talking just from my experience, people like me, regular IT consultants. And I'm not even talking about US Tech, in my case. But likely some of large US Techs, has some similar arrangements.

Phat Cat

Interesting piece in the IT today about rent fixing

The Government is investigating reports of “rent fixing” by an investment fund to register rents as artificially higher than the amount charged to tenants.

Minister for Housing Darragh O’Brien said in the Dáil that he had asked his officials and the Residential Tenancies Board (RTB) to look at the matter following a report in the Business Post.

The issue was raised by Social Democrats housing spokesman Cian O’Callaghan on the media report which “found evidence of institutional landlords and investment firms, advertising and recording artificially high market rents that don’t reflect the actual rents actually being charged”.

Mr O’Callaghan said the practice of rent fixing has serious implications for long-term leasing “which is based on discount, off-market rents”.

Some institutional landlords were reportedly doing deals to lower rents during the pandemic but did not register them officially, to mask a decline in rents during the pandemic as renters moved out of Dublin.

The agreements could potentially circumvent rent-control rules with the rent paid monthly being less than that listed on the official lease.

Mr O’Brien said the report had been brought to his attention. “In this instance, it looks like it was an institutional investor artificially, you know, leaving the rent price higher than it actually was.

“I am looking at that. I have asked my officials with the RTB” to investigate the issue “because I’ve been very clear in saying I want rent transparency” and it was important to ensure that if landlords were providing deals or cutting rents that it was done transparently.

The Minister also criticised “instances where we know where properties have been kept vacant for quite a long number of months which is not something that I would support”.

https://www.irishtimes.com/news/politics/oireachtas/tenancies-board-and-housing-department-to-investigate-rent-fixing-1.4556521?mode=amp

Amadan Dubh

I have read through this thread and the anecdotal accounts indicate fairly noticeable rent drops. My estimate is 20% drops in rents in Dublin, from my own searches on Daft. The above story, if true, would also add credence to the anecdotal accounts.

Dav010

Amadan Dubh wrote: »

I have read through this thread and the anecdotal accounts indicate fairly noticeable rent drops. My estimate is 20% drops in rents in Dublin, from my own searches on Daft. The above story, if true, would also add credence to the anecdotal accounts.

Considering the government asked LLs for forbearance, I’m surprised they have an issue with discounts being offered on contract rate. Also, it neglects to mention RPZ legislation and the link between it and why LLs want to keep the contract rate at higher than market value.

sk8board

Amadan Dubh wrote: »

I have read through this thread and the anecdotal accounts indicate fairly noticeable rent drops. My estimate is 20% drops in rents in Dublin, from my own searches on Daft. The above story, if true, would also add credence to the anecdotal accounts.

(full time Dublin based LL)

This may be the case with 1 or 2 beds in the very Center of Dublin, for a couple of specific examples, but the broader Dublin market is certainly not down 20%, or even down at all.

Re: The artificial setting of rent prices, it was an easy thing to do during lockdown - sign a lease for €2k pm and get the first 2 months free.
The registered monthly rent is still €2k, just as the rtb request.
All that’s happened here is that the lockdown scenario has highlighted a simple loophole for landlords to not exit the lockdown and be caught with artificially low rents

Amadan Dubh

Completely agree on the RPZ points and perhaps the 20% is the city centre places now that I think of what I was searching over the past few years.

antoinolachtnai

Yellow_Fern wrote: »

The premise is simple but the support isnt. There is surprisingly little evidence that integrated housing works as designed. Possible as a lot of people these don't have any relationships with their neighbours anymore.

You don’t accept any of the conclusions of Raj Chetty’s work? These are famous, well reputed large scale studies.

There is a lot written about this. This is just one article.

https://normativenarratives.com/2015/07/07/economic-outlook-the-neighborhood-effect-on-social-mobility/

Browney7

The Student wrote: »

I suspect the properties are not been let for lower rates because of the RPZ. Nobody really knows how the WFH is actually going to play out.

So why would you drop the rent just to get someone in and then be subject to the RPZ for years to come. Remember these funds have cash on hand so don't have interest charges or need to make repayments etc so they can sit on vacant properties for some time (how long that will be remains to be seen).

Ironically if the Govt actually stopped interfering in the market rents would find their market rate. If supernormal profits are being earned then new entrants are attracted to the market to share in these profits.

So more supplies leads to lower prices.

The question remains why more supplies don't come on line if so much profits are available?

It would be interesting if they got rid of HAP interference too.

Ozark707

Browney7 wrote: »

It would be interesting if they got rid of HAP interference too.

HAP is likely to increase substantially going forward. SF saying that the true homeless figures are much higher given that many asylum seekers who have been given leave to remain are not counted in them as they are still in direct provision. I suspect there are a few other clever accounting tricks being pulled to keep the official numbers down but the councils will be searching for properties for the whole lot I imagine.