Just how bad is the fall in rents, asks Edel Morgan
UNTIL THE start of this year, the rental market was the star turn of the property market. The residential sales market might have been slowing down but stories of prospective tenants queuing - if not around the block then out the door - and offering extra rent to secure properties showed there was life in property.
These days crowd control during viewings is not something that landlords have to worry about. In fact, they are now offering extras to secure a tenant.
The supply of rental properties has nearly doubled from 6,000 units last October to over 11,000 according to the lettings website daft.ie, leaving landlords exposed to longer void periods and lower yields. Rents are falling too. Irishpropertywatch.com estimates that over the period March 27th to April 2nd there were 574 rental price reductions. The average reduction was just under €100 per month or 6.5 per cent of the asking rent.
The deluge in supply is partly down to builders and homeowners letting properties they can't sell. Another factor is foreign nationals leaving Ireland because work is getting harder to find. Falling house prices and developers' deals are also enticing buyers into buying rather than renting. According to the April Affordability Index by EBS/DKM published by Irish Property Buyer, affordability for first-time buyers is improving - due to a drop in house prices and the introduction of new mortgage interest relief bands in the Budget. It found the average first-time buying couple is better off buying than renting if they intend to hold on to the property for more than three years.
Last week a colleague told me about a friend who rented his three-bed apartment in Ballyfermot six months ago and had around 50 people to view it, with the eventual tenant offering him €2,100 - a whopping €500 more than the quoted rent.
Now he's looking for another tenant and asking €1,800 per month. He has got the sum total of two enquiries and no takers.
Just how bad is it out there? That seems to depend on who you ask. I came across a heated debate - verging on a spat - on askaboutmoney.com under the heading "Are we facing a rental crash?" with some making dire predictions about the market and economic recession and others putting it down to a temporary blip and saying we are a long way off recession.
One contributor says he has several apartments and has noticed they have become harder to let in the past month or so.
"I have had to drop rents significantly . . . and I have still not let them. I've noticed that people viewing have become fussier." He used to advertise only on Daft and by putting an ad in the local shop. Now he also puts an ad in the local paper - "something that would have been totally unnecessary up to, say, Feb of this year".
But it's an ill wind for tenants, with one saying they made a 20 per cent saving on rent "by moving from a brand new large detached house to an even bigger brand new detached house with a huge garden in a Section 23 tax incentive area. There are so many new houses that can't be sold at current prices that vendors, including developers, have decided to rent them out instead."
Another contributor looking to rent said "I'm actually looking to move, but I'm in no rush and I'm waiting for rents to come down further, and also for the right place of course . . ." Some seemed oblivious to the downturn saying they had no problem renting their properties and getting the rent they want.
The feedback from rental agents is that areas near good transport links and close to the city centre are not suffering to the same extent once the rent is realistic. But like some vendors, there are landlords harking back to the glory days who haven't yet accepted there's been a shift in the market. They're in for a reality check.
