The latest DAFT report is out covering rents, and PE's Michael Taft has written the quarterly commentary. The headline news is that rents have 'stabilised' and have started to rise - though whether this presages a long-term upward trend remains to be seen. However, the commentary goes behind the numbers to examine a
' . . . fragmented, under-capitalised 'cottage' industry lacking the professionalism and modern synergy with a strong regulatory culture that prevails in other EU countries.'
The full report and commentary can be downloaded here.
7 comments:
Good report. The biggest obstacle to the broadening of the renting demographic is the lack of family friendly housing available for rent.
Almost all properties in Ireland (well, Dublin anyway in my experienced) are furnished - and furnished to service a group of singles living together (e.g. no space for a Cot - or facilities for young children). Coupled with restrictions on customising the dwelling placed on the tenant for the duration.
How can we expect the government to act on improving the quality of rental accommodation when, on top of their ginormous salary, ministers get a special tax allowance to cover the costs of their Dublin residences if they are from outside the capital?
Full details given on this blog in November. Two names currently in the news are mentioned.
http://thestory.ie/2009/11/04/the-dual-abode-allowance/
The truth is that our government do not live in the real world and have no intention of visiting it any time soon. Humans will be living on Mars before that happens.
It is clear from the report that the only reasons rents are not continuing to fall is the continued huge subsidy from the DSFA to private landlords. Over 50% of private tenants receive support from the State with their rents and if the DSFA decides to cut support by say a further 15-20 landlords will have no choice but to follw suit. For example Current rents for a 3 bed house around the country are as follows per the Report
Area Rent DSFA(family,2 ch)
Ulster €593 €606 - €684
Connacht €639 684(Sligo),
€780 (Mayo& R'mon)
€806 Galway
Munster €679 €767 (Cork) €731
(Kerry) 684, REST
Dublin
Commuter €795 €1,100 Kildare &
Belt Wicklow
West L'ster €661 €684 Biffoland,
L'Ford, Laois W'meath
DN 15 €1,042
DN 22 € 961 All €1,100
DN 10 € 875
Dn 24 €1,007
Time to squeeze the Kulaks and save some Government money!
Niall, unfortunately it's not that simple.
There is some evidence to suggest that when rent supplement levels were reduced in previous budgets, rents didn't fall, but landlords demanded existing tenants make up the difference from their social welfare payments. This practice of landlords attempting to get tenants to illegally top-up their rent supplement rent is widespread, and adds significantly to income poverty.
It is also important to note that the Daft.ie Rental Report is based on properties advertised on Daft.ie. In most cases the landlords of these propertys refuse to consider rent supplement claimants. Because of this the Dart.ie Report does not tell us anything reliable about rent fluctuations at the bottom end of the market.
The rent supplement system has many flaws. The case for reform or replacement is strong. But simpy cutting rent supplement levels carries the risk of pushing low incomes families further into poverty.
The medium term outlook for residential property (purchase) prices is bearish for the following reasons:
- net emigration of 40-60,000
- remaining over-hang of vacant properties, despite expected house completions falling to circa 10,000 for 2010
- falling take-home-pay
- job insecurity
- credit availability to remain weak
- self-fulfilling market expectations of further price falls
With credit scarce, house prices continuing to decline, job insecurity rife and take-home-pay under pressure across the board, it is likely that a significant number of households are opting, through choice or necessity, to rent rather than to buy.
Such a shift in demand preferences could explain in part the apparent divergent direction of house prices and rents.
If there is a combination of stable rents & falling prices, this would serve to support investment yields in the buy-to-let market and, by extension, the attractiveness of residential property as an investment.
However, despite the apparent ‘stabilisation’ in the rental market, it would be foolhardy to ‘call the bottom’ on the basis of a single data set.
@Eoin
There is some evidence to suggest that when rent supplement levels were reduced in previous budgets, rents didn't fall, but landlords demanded existing tenants make up the difference from their social welfare payments.
Given that there's over-supply in the rental market, such practices should be stamped out by simply making it easier for welfare tenants to move to another apartment. Any landlord with an ounce of sense would take a cut in rental income if the alternative was an un-let property. There's strong anecdotal evidence that many private tenants are renegotiating their rental agreements with landlords only too happy to take a cut of 10% if it means keeping a good tenant in situ. No reason why the same forces shouldn't apply in the rent-allowance market.
Joe, all of that is true, but it is also important to consider the ability of certain groups of vulnerable tenants to engage in the kind of negotiation you are talking about.
Homeless charities and avodcacy groups who represent many rent supplement claimants will tell you that people with complex needs, living on low incomes, are often not in a position to renegotiate their rent or cope with the disruption of moving property.
Some landlords are aware of this vulnerability and are willing to play on it in an attempt to squeeze additional rent, illegally, from the tanant.
So any changes to rent supplement, need to ensure that the needs of this group of tenants are protected.
A crude lowering of the maximum rent levels, as announced by Minister Lenihan in his budget speech, is not the right approach.
Campaign groups, such as MakeRoom (www.makeroom.ie), have called for a detailed review of the impact on claimants of the last two rounds of cuts to rent supplement before any further changes are made.
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