Cut your prices, but not too much, to keep your holiday home full of happy tenants
WITH THE supply of holiday homes in Ireland at a record high, renting them out has become increasingly difficult. But rather than despair at the thought of your vacant second home or investment property falling into disrepair, there are steps you can take to make sure it does not stay empty.
Jacinta Stacey, director of Trident Holiday Homes, has been involved in letting holiday homes since 1984, when she started out with eight houses in Co Clare and eight in Dublin.
Now she manages more than 700 properties in 80 locations around the country.
She says that while there are many similarities between now and then – one of her first batches of houses in Landsdowne Village, Dublin 4, came available because the builder could not sell them at £45,000 (€57,000) – this recession is nonetheless “very different”.
“Back in the 1980s everyone was in the same boat and growth was more or less equal and more measured,” she says. “Now you can feel a paralysis in the economy and people either have absolutely no money to spend or they are afraid to part with it just in case things gets worse.”
This is translating into a very tough letting market, with rental revenues down about 30-40 per cent.
“Our prices haven’t gone up in six or seven years and we have discounts on practically every price,” she says. “If you were charging €500 a week in 2007, you should be charging €400 in 2011.”
Stacey points out that in 1989, the cost of renting a three-bedroom cottage in Clare for Easter week was £250 (€317.50) – this year it is €329.
It’s an increasingly competitive environment for holiday home owners. While those who have well-located properties in picturesque parts of Ireland can survive on repeat business, it’s not so easy for others.
In part, this is due to the levels of supply, with clusters of tax break schemes all over Ireland adding to the number of properties available for rent.
Where once, owners of such properties would have sold them on for a tidy profit once the tax breaks ended, now they are stuck with them and are instead looking to rent them out.
“You cannot sell them – or you could but at the most ludicrous price you could imagine,” says Stacey.
At the same time, owners of holiday homes are in competition with hotels, which have become increasingly cheaper. A number of these hotels are either in receivership or are part of the National Asset Management Agency (Nama). These properties can cut their prices to below market rates.
So, instead of paying €800 a week for a holiday home, some consumers are taking a long weekend break for half the price in a hotel, which offers food and other amenities such as swimming pools.
Stacey says this is one of the sector’s “biggest problems”. “[NamaAMA Hotels in Nama] are fleecing everybody,” she says.
At the same time, demand for holidays has fallen off dramatically. “Everything has changed in tourism,” says Stacey, pointing out that while demand from German tourists is up by about 20 per cent this year, the UK market has dropped off by about 15-17 per cent, and the domestic market is “stagnant”.With discretionary income declining, the season for holiday homes has shrunk to just July and August.
But what of the much publicised “staycation”, whereby holidaymakers are choosing to remain in Ireland for the summer, rather than going abroad?
“It’s a staycation – but it’s in the back garden!” laughs Stacey. “You can really see it this year, people are holding on, they’re just not in a position to make decisions about spending money on a holiday.”
In this tough environment, homeowners need to be pro-active about making sure their properties are rented, says Stacey, as even empty houses will need regular maintenance. “Even if you don’t open the door, it will still cost €1,000 a year to stop it from falling into the gutter,” she says.
So what to do?
According to Stacey, homeowners should be looking to get their properties rented out for at least 16 weeks of the year in order to break even. Offering more competitive prices and discounts is key.
Take care to get the price right for your property, however, rather than simply slashing it back. “Make sure you’re not underselling,” says Stacey, adding that it’s important to manage discounts and deals. “There’s no point in being a busy fool.
“Rather than let the customers tell you what they are prepared to pay for the rental, let them know what you are prepared to discount the property by. So decide in advance what that discount will be.”
Given the rising cost of managing a property, due to the imposition of the €200 non-principal private residence (NPPR) charge and rising home insurance costs, homeowners need to be aware of what they need to earn to make it a viable proposition. Factoring in changeover costs, of at least €100 a go, as well as marketing costs are essential too.
Stacey estimates that homeowners need to put aside about 12.5 per cent to 20 per cent of total rental income in order to market the property. These funds could be used to hire an agent in Ireland or, if you have your own website set up and will take calls directly yourself, to advertise the property in a newspaper or online.
With the German market heating up, it can also pay to sign up with an agent overseas who can market your property to a different customer base.
She also urges holiday home owners to “be creative”, noting that group bookings are on the rise, making up for the fall-off in families. So, just like the hotels are offering attractive packages tailored at golfers, or romantic weekends for couples, holiday homeowners could consider marketing their property for groups of hillwalkers, or for 50th birthday celebrations.
And remember, even if this is another quiet year, some income is better than none.
“If you’re only covering costs at least you’re covering them,” says Stacey.
Renting in a recession:
* Work out how much you need to earn to break even
* Be prepared to drop prices, but don’t undersell
* Set aside 20 per cent of rental income for marketing costs
* Get creative – market your property to groups
* Consider signing up with an overseas agent
