What will happen to rents if the housing market collapses?

R

room305

Registered User
Messages
477
This seems to come up regularly in the "consumer sentiment" thread. However, I thought it might be worth a thread of its own to keep the arguments together.

The consensus from what I can gather is that rents will at worst remain static but they may even fall.

The reasons given are generally:

- Currently idle housing stock may be put on the rental market if it cannot be sold so the owner can reduce monthly losses
- Recent purchasers may rent rooms to help with increasing mortgage payments
- There is an oversupply of housing, even if houses currently let are sold, the rental demand will reduce (because someone has to buy) and the oversupply remains in place.

However, I think rents may increase. There will be less buyers and more renters. Even if there is no major shortage of rental supply, many of those renters will be willing to pay higher costs because:

- They will have no desire to buy no matter what the rental costs
- If they were previously homeowners, even vastly inflated rates will seem cheaper than the mortgages they escaped from.
 
I'm in the increase column or at a minimum temporary increase. Take the Estate I live in, somewhere between 70-80% of the houses are now rented. These were practically all owner occupied until they traded up but they held on to the previous residence. If things get tight for these people surely they'll at a minimum attempt to sell up, and that's the key all it takes is all these amateur landlords to attempt to sell up for there to be a lot of people turfed out of their places and thus make rents go up. It's very hard to call, I can argue either situation fairly easily.
 
Yep, i think rents are going to increase in the short term.Aera i have an interest in the no. of properties on daft for sale has tripled in 3 months and the no. of rental properties has dropped by 20%.A lot of immigrants in the aera involved in the building game though,so in the long term rents will fall.
 
thewatcher said:
Yep, i think rents are going to increase in the short term.Aera i have an interest in the no. of properties on daft for sale has tripled in 3 months and the no. of rental properties has dropped by 20%.A lot of immigrants in the aera involved in the building game though,so in the long term rents will fall.
Click to expand...

true, but a lot would be take up by students in September wouldn't they?
 
whizzbang said:
true, but a lot would be take up by students in September wouldn't they?
Click to expand...

Eh no,no college/university in the aera.Aren't most colleges building their own accomodation now anyway,there was a thread somewhere recently saying the student rental market in limerick was in freefall because of the campus accomodation,big tax breaks involved i believe in them.
 
thewatcher said:
Yep, i think rents are going to increase in the short term.Aera i have an interest in the no. of properties on daft for sale has tripled in 3 months and the no. of rental properties has dropped by 20%.A lot of immigrants in the aera involved in the building game though,so in the long term rents will fall.
Click to expand...

Do you not think that the increase in supply will keep a downward pressure on rents? I can see why rents could go up short term but long term I think they will reduce in real terms. Outside of Dublin (and maybe Galway & Cork) rents have plummeted in recent years. The advent of S50 has caused serious downward pressure across the rest of the market. In 3 years time I think some of these S50's could be open to non-students which will further increase supply. The college population is decreasing all the time so that doesn't help landlords either.
 
beattie said:
Do you not think that the increase in supply will keep a downward pressure on rents? I can see why rents could go up short term but long term I think they will reduce in real terms.
Click to expand...

Not being smart,but is that not exactly what i said.
 
Very interested in this topic.

I've been renting since the mid 80's and has been very big changes since then, very very curious to see how things go.

To put in perspective -

In the late 80's rented a lovely apartment in Clarinda Park in Dun Laoghaire - I paid for this out of my weekly wage as a burger flipper in McDonalds

Made the dumbest move ever (financially) and moved in with friends in Bray in the 90's as a house share for slightly less money. That lasted a few years, but eventually the owner sold and by then, was no longer flipping burgers, and was financially in a much better place - got a nice enough one bed in town for about 2.5 times what I had been paying for the Dun Laoghaire place several years before.

Again landlord sold and had to move a couple of years later (now around 2001), couldn't find a semi decent place for love nor money, original place in Dun Laoghaire way above my price range even though I was earning way above what I had been back then.

Viewed many many places and finally got lucky and found a nice place in Rathgar (small though) where I am today.

Salary has risen by now to the point where I could relatively easily afford the same place in Dun Laoghaire again but for 1200-1400+ per month I just cannot stomach paying that when as a minimum wage burger flipper I could have gotten it before!!

Where rental prices go from here really interests me, possibly up a bit due to many landlords panicking and selling if the market truely starts crashing.

Followed in a few years by the older smarter money snapping up these properties and rents returning back to more realistic/historical values.

Personally while rental prices are still roughly at 2001 levels (in my area of renting - one bed) abeit far far better furnished and cleaner than in those days, I think they were over priced then too compaired to other cities relative to Dublin in size.
 
I think there is still a level of shortage for good quality rental houses in Cork - just basing it on my observations as well as a couple of people I know are looking to rent in around Cork city right now & find that the rent (for decent houses) are high enough.

That's my observation but interested in hearing others.

Also with regard to what happens to rents...if investors start bailing out for example it will lead to an even shorter supply & drive rents up in my opinion

ninsaga
 
Rental supply will increase and rents will fall because:

- Struggling owner cubs will emigrate or move back in with Mammy and Daddy and attempt to rent out their commuter hellhole to avoid selling it

- Vacant property will be pressed into rental service

- Downturn in construction will cause immigrants to leave, chasing better opportunities

- Continued over-supply in the new homes market will ensure that there are plenty of properties sold at ever lower prices supplying the rental market

- Big drop in demographics coming through over the next few years will result in fewer renters/FTB's competing for property to rent or buy
 
whathome said:
Rental supply will increase and rents will fall because:

- Struggling owner cubs will emigrate or move back in with Mammy and Daddy and attempt to rent out their commuter hellhole to avoid selling it

- Vacant property will be pressed into rental service

- Downturn in construction will cause immigrants to leave, chasing better opportunities

- Continued over-supply in the new homes market will ensure that there are plenty of properties sold at ever lower prices supplying the rental market

- Big drop in demographics coming through over the next few years will result in fewer renters/FTB's competing for property to rent or buy
Click to expand...

Agreed with all. IMO we will construct even in a medium crash an average of 60,000 units per year for next 5 years or enough to house up to 750,000 people. Also alot of the jobs growth in past 5r years is property and public sector ( which is financed by the property sector).

Sellers may not be able to sell at any price and will need income. IMO Landlords currently not bothered to rent due to capital rises will press these properties into service - can boast about not renting now but will look silly if prices are falling and not renting out.
 
Last edited:
whathome said:
Rental supply will increase and rents will fall because:

- Struggling owner cubs will emigrate or move back in with Mammy and Daddy and attempt to rent out their commuter hellhole to avoid selling it
Click to expand...

Don't believe this will happen as, if FTBs are living in their property for less than five years, and subsequently decide to rent out the property, they are liable for stamp duty clawback at investor's rates. In the majority of cases, this would cost them more than annual rental. They would also be liable to CGT on subsequent sale (if later than 12 mths.).


- Downturn in construction will cause immigrants to leave, chasing better opportunities
Click to expand...

A lot of immigrants also work in the hotel/catering industry etc. so not all are reliant on construction. Having said that, if there is a housing crash, as some predict, all industries will be affected.

- Continued over-supply in the new homes market will ensure that there are plenty of properties sold at ever lower prices supplying the rental market
Click to expand...

As you've already stated, most new homes are going up in commuter "hell holes", although I suspect not everyone who commutes is of that opinion. I don't believe these new properties will have much of an impact, on major cities and towns, with regard to rental. If the general public are sick of the commute and, for one reason or another, decide to sell....why would they want to rent back in commuterland?

For this reason I believe that rents, in the major cities and towns, will increase, while houses in commuterland will remain empty and fail to sell.
 
liteweight said:
Don't believe this will happen as, if FTBs are living in their property for less than five years, and subsequently decide to rent out the property, they are liable for stamp duty clawback at investor's rates. In the majority of cases, this would cost them more than annual rental. They would also be liable to CGT on subsequent sale (if later than 12 mths.)
Click to expand...

If they have to sell, who's going to buy? FTB's will be holding off, terrified of the collapsing market. Amateur investors might be attracted though, hoping the market has bottomed - increasing rental supply further.

liteweight said:
For this reason I believe that rents, in the major cities and towns, will increase, while houses in commuterland will remain empty and fail to sell.
Click to expand...

Agreed that rents in major cities and towns will hold up better than cummuterland but will fall nonetheless.
 
To put it simply, in the event of a crash, rent will drop because people will have less money.

Isn't there meant to be a direct relationship between rent and house prices?
 
whathome said:
If they have to sell, who's going to buy? FTB's will be holding off, terrified of the collapsing market. Amateur investors might be attracted though, hoping the market has bottomed - increasing rental supply further.
Click to expand...

I thought you said they'd emigrate or move back in with parents in order to avoid selling? I was just pointing out that it's not really feasible from a financial standpoint. If the worst happens, they will either have to grin and bear it (if they can), or sell, even if it's at a loss. I think we've a long way to go before the market here falls into negative equity.

Agreed that rents in major cities and towns will hold up better than cummuterland but will fall nonetheless.
Click to expand...

Why so? My reason for believing they will hold up and even rise, is that if more and more people hold off on buying, either because they have been priced out, or want to wait for a 'bargain'....they'll look to rent closer to the city, especially in the better areas. Demand will rise and therefore rents will rise also.

If, as some suggest, investors start to sell off wholescale, their tenants are displaced. If FTBs decide to give up the ghost, they still need somewhere to live and will not choose to rent out in the sticks.
 
Isn't there meant to be a direct relationship between rent and house prices?
Click to expand...

There is meant to be one in every housing market but the Central Bank in its wonderful model of the Irish housing market decided that this fundamental link does not apply in Ireland (on page 8). Their model seems to say (the maths being way beyond me) that it is only interest rates that matter, thus justifying the present bubble. Bunch of geniuses.

[broken link removed]
 
Panzraam said:
There is meant to be one in every housing market but the Central Bank in its wonderful model of the Irish housing market decided that this fundamental link does not apply in Ireland (on page 8). Their model seems to say (the maths being way beyond me) that it is only interest rates that matter, thus justifying the present bubble. Bunch of geniuses.

[broken link removed]
Click to expand...

Thanks for that, I started reading the prescribed page but when I encountered (quote) 'augmented Dickey Fuller' I had to revert to my old text books. And hey I came across a theory called supply and demand seems old hat now. :eek:
 
whathome said:
The reasons listed above!
Click to expand...

I thought these were reasons rents, in general, might fall? What I meant was what is your reason for thinking they will fall in the major cities? If, as you said, FTBs might be forced to sell, and others are not prepared to pay high prices for the privilege of living in commuterland, AND investors start to sell off their properties in the cities.......where are those people who wish to rent going to live? As time goes on I feel they will be willing to pay a premium for living in the city rather than a back breaking mortgage to live in commuterland.
 
You must log in or register to reply here.
Back
Top