Dublin - Significant reduction in rents coming?

JimmyVik

Phat Cat wrote: »

Haha spoken like a true landlord To be honest I think he's resigned to moving on as his landlord seems to be fairly unreasonable and won't budge on price. Also do you really think that the rents will surge in price in the Autumn? From the outside looking in that seems fairly unattainable as the market seems to have hit it's ceiling now, higher end places might go back up in price, but I can't see the average apartment in Dublin going any higher then they are now.

I really do think all the cards are stacked now for a massive shortage of rentals in the Autumn. That will surely have an effect on the rents.

sk8board

Full time LL here.

Rents will always have a ceiling, as it’s connected to earnings. Imagine for a second that we doubled everyone’s rent overnight - most renters literally don’t earn that amount of money, so yes there’s always a ceiling, usually around 33-50% of post tax income.

As for ‘what will happen in the autumn’, all I can see in the data is that LL’s are continuing to exit the market now that house prices are high, especially those still in negative equity, or the accidental LLs who carry significant risk by having all their rental income coming from one tenancy.
The RTB reports clearly show a drop in total LLs (it’s down from 220k in 2012 to 165k today, and 120k of those LLs have just one property).

Looking even further into the future, today’s news carries the mortgage drawdowns by volume and by value, for Q1.
Buy to Let mortgages account for just 1.5% of drawdown value, just €36m of mortgages to 232 people - a pretty pitiful number for a low(er) interest rate money market.

Even allowing for cash purchasing LLs, it’s very hard to see anything but supply contraction for the next few years, with demand remaining stable IMHO.

The Supply side is moving very quickly towards professional LLs and large REITs, which isn’t a bad thing, as, irrespective of current high rent prices, it provides assurance to Tenants and landlords alike.

Phat Cat

I agree with everything you said apart from this bit

sk8board wrote: »

Rents will always have a ceiling, as it’s connected to earnings. Imagine for a second that we doubled everyone’s rent overnight - most renters literally don’t earn that amount of money, so yes there’s always a ceiling, usually around 33-50% of post tax income

Rents have doubled in the last 10+ years but wages obviously haven't followed suit as it simply wouldn't be attainable in any way shape or form.

Back in 2011 you could rent a decent one bedroom apartment for €800/€900 in Dublin, but now a similar apartment will set you back around €1600/€1700/€1800.

According to Satista.com the average industrial wage back in 2011 was around €47k pa, now it's around €49k pa. So not much difference at all. Obviously most people won't be earning anything close to those figures, which makes the massive rent hikes even more alarming for them.

The lack of supply always comes into it, but there are literally thousands of apartments laying empty across the city at REITs won't budge on their prices and are happy enough to sit on their investments.

I'm just glad I got a mortgage when I did because I couldn't imagine what's it like out there now for tenants, it must be a nightmare.

Dav010

Phat Cat wrote: »

I agree with everything you said apart from this bit



Rents have doubled in the last 10+ years but wages obviously haven't followed suit as it simply wouldn't be attainable in any way shape or form.

Back in 2011 you could rent a decent one bedroom apartment for €800/€900 in Dublin, but now a similar apartment will set you back around €1600/€1700/€1800.

According to Satista.com the average industrial wage back in 2011 was around €47k pa, now it's around €49k pa. So not much difference at all. Obviously most people won't be earning anything close to those figures, which makes the massive rent hikes even more alarming for them.

The lack of supply always comes into it, but there are literally thousands of apartments laying empty across the city at REITs won't budge on their prices and are happy enough to sit on their investments.

I'm just glad I got a mortgage when I did because I couldn't imagine what's it like out there now for tenants, it must be a nightmare.

You have to bare in mind that rents in 2011 were at their lowest because Ireland was in the midst of a deep recession and there was an abundance of properties to let. On one of my properties at the time the rent was 33% lower than it was renting for in 2008 before I bought it, wages did not fall by 33%. So it is not an inexplicable increase in today’s market.

Claw Hammer

sk8board wrote: »

Full time LL here.

Rents will always have a ceiling, as it’s connected to earnings. Imagine for a second that we doubled everyone’s rent overnight - most renters literally don’t earn that amount of money, so yes there’s always a ceiling, usually around 33-50% of post tax income.

That is not correct. Individual tenants will try to keep their rents at an affordable level. When rents rise renters squeeze in tighter. The tenant of a 1 bed shares a 2 bed. The 3 bed house sleeps 5. When rents drop the reverse happens. The supply side is show a drop in available rentals but the demand side is going to show a big increase when the colleges get back into the lecture rooms.

eleventh

Dav010 wrote: »

You have to bare in mind that rents in 2011 were at their lowest because Ireland was in the midst of a deep recession and there was an abundance of properties to let.

Prices in 2011 were around what they should be, with no limits on supply - that is how it should be.
What some call 'a recession' was a correction to over-inflated prices and lack of supply, which we are seeing again now only worse, that the same people call 'recovery'. (That too will be corrected).

Claw Hammer

eleventh wrote: »

Prices in 2011 were around what they should be, with no limits on supply - that is how it should be.
'. (That too will be corrected).

The only level rents should be is what the market will bear. The level of rents in 2011 forced a reduction in supply because some landlords were forced out of business. The tools used to control rents are wrongheaded and doomed to fail.

Dav010

eleventh wrote: »

Prices in 2011 were around what they should be, with no limits on supply - that is how it should be.
What some call 'a recession' was a correction to over-inflated prices and lack of supply, which we are seeing again now only worse, that the same people call 'recovery'. (That too will be corrected).

That is a rose-tinted way of looking at it, economists would argue that recovery led to the correction in the markets. What we have now is far from normal market conditions, LLs leaving the market in droves at a time when rental rates are at historic highs, then the pandemic should have caused a collapse in rents, it didn’t. Somewhere is between is probably what “normal” should look like, but that isn’t going to happen until new builds catch up with demand.

sk8board

Phat Cat wrote: »

I agree with everything you said apart from this bit



Rents have doubled in the last 10+ years but wages obviously haven't followed suit as it simply wouldn't be attainable in any way shape or form.

Back in 2011 you could rent a decent one bedroom apartment for €800/€900 in Dublin, but now a similar apartment will set you back around €1600/€1700/€1800.

According to Satista.com the average industrial wage back in 2011 was around €47k pa, now it's around €49k pa. So not much difference at all. Obviously most people won't be earning anything close to those figures, which makes the massive rent hikes even more alarming for them.

The lack of supply always comes into it, but there are literally thousands of apartments laying empty across the city at REITs won't budge on their prices and are happy enough to sit on their investments.

I'm just glad I got a mortgage when I did because I couldn't imagine what's it like out there now for tenants, it must be a nightmare.

I know what you’re saying, but you can’t really compare the top of the market, with the bottom of the market. The % of the avg industrial wage being spent on rent is far far higher today than 10 years ago.
My point was simply that there is a limit to what people will spend for a given property.

sk8board

Claw Hammer wrote: »

That is not correct. Individual tenants will try to keep their rents at an affordable level. When rents rise renters squeeze in tighter. The tenant of a 1 bed shares a 2 bed. The 3 bed house sleeps 5. When rents drop the reverse happens. The supply side is show a drop in available rentals but the demand side is going to show a big increase when the colleges get back into the lecture rooms.

You’re applying a marketwide view to one section of the market - single room renters.
You’re also assuming that LLs are prepared to rent their property room by room - I certainly don’t, and wouldn't and I rent single family homes in the Dublin area.
Gouger landlords do this, of course, cram them into every wardrobe if they could, and that what gives everyone a bad name.

Claw Hammer

sk8board wrote: »

You’re applying a marketwide view to one section of the market - single room renters.
You’re also assuming that LLs are prepared to rent their property room by room - I certainly don’t, and wouldn't and I rent single family homes in the Dublin area.
Gouger landlords do this, of course, cram them into every wardrobe if they could, and that what gives everyone a bad name.

I am not assuming anything of the sort. I am simply pointing out that when rents go up, those who can't afford it squeeze in tighter. There will of course those who can pay a higher rent and stay put. What individual landlords do is irrelevant. The whole point is that rents are not limited by earnings in the manner in which you suggested.

sk8board

Claw Hammer wrote: »

I am not assuming anything of the sort. I am simply pointing out that when rents go up, those who can't afford it squeeze in tighter. There will of course those who can pay a higher rent and stay put. What individual landlords do is irrelevant. The whole point is that rents are not limited by earnings in the manner in which you suggested.

“Individual Landlords” aren't simply ok with people simply ‘squeezing in tighter’. You forget where exactly these renters are squeezing in tightly. The market in Dublin is made up of over 70% individual landlords with an individual rental property.
I’d even argue that one of the bigger problems with the current market dynamic is those individual landlords you find irrelevant. Thankfully those landlords are exiting the market in their thousands and in general being replaced by large corporate landlords, who will be beholden to the rules and regulations.

The Dublin market is so much more than the unregistered bedsits in the city center like see one PrimeTime, built in the early 1900’s, with 30 people living in them.

My point is simply that as a LL in Dublin for 17 years, I experience has been that the ceiling of the market in Dublin is now here. We’re seeing some -10 to +10% movements up and down in different sections of the market as it settles at that ceiling, where I think it might sit for a few years while housing supply catches up.

Claw Hammer

sk8board wrote: »

LLs aren't ok with people simply ‘squeezing in tighter’, especially where standard tenancy agreements don’t allow it to begin with.

The market is so much more than the unregistered bedsits in Dublin City center we see one PrimeTime, built in the early 1900’s, with 30 people living in them.

Some landlords are happy to get the highest rent possible. It is not unknown to have 4 resident in a 2 bed city centre apartment. When the same apartment was available at half the rent there were 2 residents. Without overcrowding people can live in smaller spaces. A person who might have rented a 2 bed on their own rents a 1 bed and so on.

sk8board

Claw Hammer wrote: »

Some landlords are happy to get the highest rent possible. It is not unknown to have 4 resident in a 2 bed city centre apartment. When the same apartment was available at half the rent there were 2 residents. Without overcrowding people can live in smaller spaces. A person who might have rented a 2 bed on their own rents a 1 bed and so on.

All very true.
But across the wider Dublin market the rental ceiling is very much approaching or already here.
As the economists say - “trees don’t grow to the sky”.

Claw Hammer

sk8board wrote: »

All very true.
But across the wider Dublin market the rental ceiling is very much approaching or already here.
As the economists say - “trees don’t grow to the sky”.

Rents have dropped and are continuing to drop at the moment. It can hardly be approaching the maximum when it is falling. What is going to be interesting when the reopening happens is whether the move to country towns will reverse. Many areas outside Dublin have very few available rentals.

Phat Cat

Claw Hammer wrote: »

Rents have dropped and are continuing to drop at the moment. It can hardly be approaching the maximum when it is falling. What is going to be interesting when the reopening happens is whether the move to country towns will reverse. Many areas outside Dublin have very few available rentals.

Rents have dropped? Really? In RPZ's, which is most cities in Ireland at this stage, rents have been rising by 4% per year since 2016. If you rent a two bedroom apartment in Dublin city centre that costs €2,500 per month, your rent will probably go up to by €100 per month this year.

Smouse156

Phat Cat wrote: »

Rents have dropped? Really? In RPZ's, which is most cities in Ireland at this stage, rents have been rising by 4% per year since 2016. If you rent a two bedroom apartment in Dublin city centre that costs €2,500 per month, your rent will probably go up to by €100 per month this year.

Go up €100 a month to zero when the tenant moves out to a LL offering 1/2 months free rent. If rents were really rising in Dublin, then there wouldn’t be all these deals:

https://www.dublinlive.ie/news/dublin-news/dublin-tenants-offered-six-week-19905851

Outside Dublin, definitely rising due to limited supply and everyone fleeing Dublin!

Amadan Dubh

I saw this on LinkedIn today, from O'Donnellan Joyce Auctioneers. They claim that what they have observed does not align with what has been reported by Daft, that rents in the West have in fact dropped.

Fkall

Market rent in Dublin may have been reached a ceiling but the majority of tenants are not paying market rent thanks to RPZs. This means the reality of the 4% rent increase is here to stay until either the legalisation is abolished or the passing rents catches up with the market rate.

Phat Cat

Smouse156 wrote: »

Go up €100 a month to zero when the tenant moves out to a LL offering 1/2 months free rent. If rents were really rising in Dublin, then there wouldn’t be all these deals:

https://www.dublinlive.ie/news/dublin-news/dublin-tenants-offered-six-week-19905851

Outside Dublin, definitely rising due to limited supply and everyone fleeing Dublin!

Using Dublin's Docklands is a bad example, the rents there are the highest in the country and only a tiny percentage of the population can afford €2,430 a month for a one-bed apartment, €3,800 for a two-bed or €5,030 for a three-bed duplex. Of course those prices are going to fall as they were unrealistic in the first place and were only held up by the staff of the tech companies in that area.

Ozark707

Phat Cat wrote: »

€3,800 for a two-bed. Of course those prices are going to fall as they were unrealistic in the first place and were only held up by the staff of the tech companies in that area.

They are already falling down in the docklands.

Jmc25

Phat Cat wrote: »

Using Dublin's Docklands is a bad example, the rents there are the highest in the country and only a tiny percentage of the population can afford €2,430 a month for a one-bed apartment, €3,800 for a two-bed or €5,030 for a three-bed duplex. Of course those prices are going to fall as they were unrealistic in the first place and were only held up by the staff of the tech companies in that area.

Obviously those prices quoted would be on the very extreme end of the scale, but it's a fair point. A quick look on daft shows a huge amount of apartments in or around 1900 for a one bed and 2500 for a two bed with study type apartment. Genuinely curious if there are actually enough people on decent incomes looking to rent as opposed to buy and willing to pay these rents to fill these apartments, even when things reopen. I mean they look nice and have some extras such as onsite gym etc but at those prices I'd just wonder.

JimmyVik

Claw Hammer wrote: »

Rents have dropped and are continuing to drop at the moment. It can hardly be approaching the maximum when it is falling. What is going to be interesting when the reopening happens is whether the move to country towns will reverse. Many areas outside Dublin have very few available rentals.

Most people who have moved to the country during covid are living with their parents. I think this welcome might wear out sooner than later


And as someone from a rural area, i can tell you that most people who grow up in a rural area dont want to live in one, especially after they have had a taste of urban life. Maybe when they hit maybe 45 or so they get a hankering for the quiet life again and might consider a move to the home town then. And even then they have to convince the other half to move to a rural area too.

JimmyVik

Phat Cat wrote: »

Rents have dropped? Really? In RPZ's, which is most cities in Ireland at this stage, rents have been rising by 4% per year since 2016. If you rent a two bedroom apartment in Dublin city centre that costs €2,500 per month, your rent will probably go up to by €100 per month this year.

If rents are dropping would it not fall out of being an RPZ ?

Ozark707

Jmc25 wrote: »

Obviously those prices quoted would be on the very extreme end of the scale, but it's a fair point. A quick look on daft shows a huge amount of apartments in or around 1900 for a one bed and 2500 for a two bed with study type apartment. Genuinely curious if there are actually enough people on decent incomes looking to rent as opposed to buy and willing to pay these rents to fill these apartments, even when things reopen. I mean they look nice and have some extras such as onsite gym etc but at those prices I'd just wonder.

There is certainly a market at the 2.5k for a nice 2 bed down there. I know someone who recently got one for that sort of money and there were a few interested parties at the viewing. That said it was previously let for over 3k so I am guessing it was more on the high end.

Supply definitely seems to be shrinking when compared to 2-3 months ago which lends credence to the argument that offices are now starting to reopen somewhat.

JimmyVik

Ozark707 wrote: »

There is certainly a market at the 2.5k for a nice 2 bed down there. I know someone who recently got one for that sort of money and there were a few interested parties at the viewing. That said it was previously let for over 3k so I am guessing it was more on the high end.

Supply definitely seems to be shrinking when compared to 2-3 months ago which lends credence to the argument that offices are now starting to reopen somewhat.

I dont think they are opening yet, but as in my company people have been told they have to come back to Ireland if they are abroad and that work in the office will go on.
And some people are filtering back now to pick up a cheaper rent than when the rush starts in a few month.
It will be carnage in the autumn with unis and work back in full flow.

Phat Cat

JimmyVik wrote: »

If rents are dropping would it not fall out of being an RPZ ?

The RPZ certainty measure is in place until 31 December 2021, after that it'll be up for review. I think most LL's will try to increase their rents by 4% this year due to this, as nobody knows what will happen next.

The only rents that are going down are in the higher end of the market, but this was always going to happen, as those rents were mostly hyperinflated due to the multinationals in close proximity.

EDIT: I just read this report on how REITs will face no penalties for leaving apartments empty to keep their rent prices high. This is so wrong on so many levels.

https://www.newstalk.com/news/leaving-dublin-luxury-apartments-vacant-doesnt-break-competition-rules-review-finds-1188114

Ozark707

Phat Cat wrote: »

The only rents that are going down are in the higher end of the market, but this was always going to happen, as those rents were mostly hyperinflated due to the multinationals in close proximity.

I am noticing some rents in the mid market range (1800-2100) coming down and also that places are remaining up for a long time so I don't think it is just the high end that is being hit.

Ozark707

JimmyVik wrote: »

I dont think they are opening yet, but as in my company people have been told they have to come back to Ireland if they are abroad and that work in the office will go on.
And some people are filtering back now to pick up a cheaper rent than when the rush starts in a few month.
It will be carnage in the autumn with unis and work back in full flow.

Certainly seems that way as the likes of the REITs seem to be happy to ride it out and that is the only source where a marked increase in supply in the short term might come from.

Edgware

I am aware of a rent increase of 4% on paper. However the landlord has written a "Prompt payment bonus" into the contract. This bonus equals 4% so no one loses out and down the line he maintains the rent rate