Minister Murphy actively pushing landlords out of the market in the face of the latest Daft report

[Folsom]

Why should a tenant's circumstance come into it for a landlord?

Because they are the tenant, they have agreed a rent price. What sort of social instability do you want to create if landlords can offer below market rents only to jack them up on a whim because other landlords are charging more?

Conversely, if the landlord has a drop in other income should the tenant do the decent thing and pay the landlord more rent?

If a tenant and landlord agree a rent then in the absence of real reason for a rent increase, such as increasing incomes, increasing interest rates, then any increases at all should be modest and sustainable on the existing tenant.
It helps to promote social stability, keeps exploitation at bay.

Again, why? The landlord will try to get the highest rent they can. Conversely the tenant will try to get the lowest rent they

Yes, and once a rent has been agreed then any increases need to be sustainable.

Yes, but now, because of government policy, the value of their asset is under threat through no fault of their own.

How is the value of their asset under threat? It was the landlord who pitched and agreed the rent price in the first place.
You are not suggesting that if a landlord charges €1,000pm and decides to sell the property that they should be allowed to double the rent in order to try extract a better price for the property?
What sort of chaos would ensue if that were allowed?
This is all cowboy amateur landlord stuff. This type of thinking has no place in a modern civilized society when dealing with critical necessities such as housing.
The sooner these short-term chancer landlords are driven out the better. They have no plan, no strategy, get them out of the private rental market.

This is what's not fair. You can be sure that any new property coming onto the market will be rented out for the max rent.

Is that a good thing or a bad thing? Which is it?
It will only be rented out if a tenant agrees to pay the max rent. Good luck to the landlord if it works out. But if the landlord drops the rent 30-40% to get a tenant, only to jack up the rent once they are in, what sort of chaotic housing market will that be?

 

[AlbacoreA]

At this point I have zero faith in the govt not bringing in more rules.

If I was a landlord stuck on a very low rent it might be good time to sell up, wait a couple years see what's happening then re enter the market with a higher rent and possibly house process will have fallen due to the increased supply.

..or if the govt have made it entirely untenable due to rule changes just forget about it.

 

[NoRegretsCoyote]

@Folsom

Landlords who in 2016 were keeping rents 30% below market rate were doing so in the anticipation that they could (at very least) bring the rent back to market levels when a tenant left and they had to bring it to market again.

The rent controls introduced in 2017 made this impossible, as new tenancies are tethered to the old rent, no matter how low it was.

This seems to punish landlords for many years for doing the decent thing for their tenants in the first place.

 

[Folsom]

Landlords who in 2016 were keeping rents 30% below market rate were doing so in the anticipation that they could (at very least) bring the rent back to market levels when a tenant left and they had to bring it to market again.

Im sorry this doesn't make sense to me. Why would a landlord keep rents 30% below "market rate"?
How is the "market rate" determined in first instance?
Perhaps a simple example will help me understand?
There are two similar properties, same location on the market. Both are let out to tenants. One tenant is paying €1,300pm, the other tenant is paying €1,000pm.

What is the market rate?
What is the average market rate?

 

[NoRegretsCoyote]

@Folsom

The market rate is the rent that a property would fetch if it was advertised openly.

For example imagine I could get €10k for my car via private sale on carzone. I could sell it there, or sell it to my brother for €8k. The market value of the car would still be €10k, not €8k.

 

[Sarenco]

@Folsom

I'm going to assume that your question is genuine.

Because of the way the RPZ regime was introduced, many landlords find that they can now achieve a gross yield of less than 6% on their property. That's often the equivalent of a net, after-tax, yield of around 2%.

Does that answer your question? If not, could you be specific about what you still find so confusing?

 

[Folsom]

@Folsom

The market rate is the rent that a property would fetch if it was advertised openly.

For example imagine I could get €10k for my car via private sale on carzone. I could sell it there, or sell it to my brother for €8k. The market value of the car would still be €10k, not €8k.

So if you sold it for 8k you would be selling it for 2k below market value?
But by selling it for 10k there is no chance that you are selling it for 2K above market value?

Take a 2 bed apt in Galway that fetched €300k in 2007, but a two years later could only get €150k.
Was the €300k above market value, or the €150k below market value? Or are both prices just a point in time that serve as the market value of the property at that time? In other words, there is no above or below market value, there is only the market value at that point in time?

 

[Folsom]

@Folsom

I'm going to assume that your question is genuine.

Does that answer your question? If not, could you be specific about what you still find so confusing?

Ok, if its no trouble?
A property valued at, say €200k is yielding €12k in rent - gross yield 6%. The market value of rents on similar properties increases during the year to €15kpa.
So the 12k landlord wants to raise the rent to exploit the €15k. But before he does, the government introduce RPZ at 4% max increase, leaving the landlord only able to raise the rent to €12,480pa.
The property value is still €200k. So the yield is now 6.24%.
So despite the RPZ, the gross yield has risen.
If that much is accurate perhaps I can ask about the net yield, admittedly more complex.

 

[NoRegretsCoyote]

@Folsom

Market value is a standard term in economics, accounting, finance, etc.

If you are in doubt look it up in a textbook.

 

[NoRegretsCoyote]

Ok, if its no trouble?

So the 12k landlord wants to raise the rent to exploit the €15k. But before he does, the government introduce RPZ at 4% max increase, leaving the landlord only able to raise the rent to €12,480pa.
The property value is still €200k. So the yield is now 6.24%.
So despite the RPZ, the gross yield has risen.

Not if the value of the house has risen too.

 

[Folsom]

@Folsom

Market value is a standard term in economics, accounting, finance, etc.

If you are in doubt look it up in a textbook.

I know what it is. Im not sure some landlords do.
I put a very simple question about two properties. It should be easy to answer?

 

[Folsom]

Not if the value of the house has risen too.

True, so rising house prices are reducing yields on rent?

 

[Leper]

I believe there is something dreadfully wrong with a country that has rent prices higher than a mortgage repayments. Newspaper headlines over the past few days reflect this. Certainly, in the current climate I wouldn't buy a house to rent it out in Ireland. Nearly everything is stacked against the landlord and to a certain extent the tenant. The main beneficiaries are (i) The Revenue Commissioners (ii) The Solicitors (iii) Builder/Maintenance people (iv) Real Estate Agents.

Seventeen years ago we bought an apartment in Spain. We hoped to rent it out, use it for our own breaks and hoped we could not lose on our investment and effectively it was to be the major part of our retirement fund. Things didn't work out and a recession kicked in hitting Spain harder than Ireland. Our property decreased in value by €70,000.00 and we never really hit it off with renting it out. In two words:- Bad Investment.

Property prices are at nearly an all-time low in coastal Spain with just a 5% rise (on under-valued prices) over the past two years and because of Brexit no further increase will happen in the near future. Despite my previous advice on this forum suggesting not to buy in Spain, things are changing there and perhaps opportunity knocks for some investors here. Obviously, there are regulations regarding renting in Spain, but nothing remotely like what is happening here. But, before you dip your toes remember there are no problems renting during June, July, August. It's the period October to May is the problem. You will need somebody to look after the property and employ maintenance when necessary. Utilities are payable all year including refuse charges.

 

[Firefly]

Because they are the tenant, they have agreed a rent price. What sort of social instability do you want to create if landlords can offer below market rents only to jack them up on a whim because other landlords are charging more?

If a tenant and landlord agree a rent then in the absence of real reason for a rent increase, such as increasing incomes, increasing interest rates, then any increases at all should be modest and sustainable on the existing tenant.
It helps to promote social stability, keeps exploitation at bay.

Yes, and once a rent has been agreed then any increases need to be sustainable.

How is the value of their asset under threat? It was the landlord who pitched and agreed the rent price in the first place.
You are not suggesting that if a landlord charges €1,000pm and decides to sell the property that they should be allowed to double the rent in order to try extract a better price for the property?
What sort of chaos would ensue if that were allowed?
This is all cowboy amateur landlord stuff. This type of thinking has no place in a modern civilized society when dealing with critical necessities such as housing.
The sooner these short-term chancer landlords are driven out the better. They have no plan, no strategy, get them out of the private rental market.

Is that a good thing or a bad thing? Which is it?
It will only be rented out if a tenant agrees to pay the max rent. Good luck to the landlord if it works out. But if the landlord drops the rent 30-40% to get a tenant, only to jack up the rent once they are in, what sort of chaotic housing market will that be?

Over & out for me Folsom. With respect your socialist views are too far gone. You don't seem to understand basic private property rights and fail to see that incentives drive economies and societies forward. Also, your descriptions of small landlords is also unwarranted.

 

[Folsom]

You don't seem to understand basic private property rights and fail to see that incentives drive economies and societies forward.

I totally understand property rights. This topic is about the Minister apparently pushing out landlords out of the market. There is scant evidence of this. A minor drop in the amount of landlords at best implies larger landlords replacing smaller landlords, at worst, that conditions are tough for some landlords typically those who have no long-term strategy.
I never attributed any description to small landlords. I only attributed description to landlords who are clearly out of their depth and most probably should never have become landlords in the first place. It is a good thing that these landlords are leaving the market, hopefully to be replaced with landlords capable of understanding the sector they are entering.
Nothing to do with socialist views, all about keeping up standards.

Ive seen worse descriptions of tenants on this site without anyone exiting the discussion.

 

[Firefly]

Interesting article here explaining why landlords are leaving the market in large numbers:

https://www.irishtimes.com/business...leaving-the-market-in-large-numbers-1.3360363

Essentially, on the financial side, unless you are a cash buyer it's gonna cost you.

Given the rise in house prices in the past 5-6 years I would assume many wouldbe new landlords are not entering as the capital appreciation is limited and the costs and hassles are just not worth it.

It would be interesting to get numbers on idle investment properties too. I would imagine quite a few landlords (with small mortgages) would be tempted to just leave the property idle.

 

[Folsom]

There are two similar properties, same location on the market. Both are let out to tenants. One tenant is paying €1,300pm, the other tenant is paying €1,000pm.

What is the market rate?
What is the average market rate?

No takers. I will do my best to figure it out.

The market rent value is €1300 and €1000 respectively, being the amount that landlord and tenant have agreed the rent to be.
The average market rent is €1150. So at once, one property is rented out under the avr market value and one is rented out above avr market value.
The problem seems to be that the landlord renting out below avr market value would like to increase to €1150 but is restricted via RPZ of 4% to €1040. The tenant in the €1300 property would presumably like to see their rent reduced to €1150 too - but tough, €1300 is the price agreed so pay up.
Even if the €1000 property was allowed to go to €1150, then a new average market rent would emerge of €1,225...and again, the 'problem' of below avr market rents continues.
The answer to all of this is to build a third and fourth and fifth house until such time demand for housing is at sustainable levels.
The answer is not to allow spiraling rents and in turn spiraling house prices - can anyone remember what happened last time?

I do empathise with anyone who is genuinely caught in tight situations and I appreciate that with increased taxes that is the case for many.
But I dont subscribe to notions of landlords reducing rents because they like to 'reward good tenants' but now wish to take those rewards away but jacking up rents as high as possible. Landlords pitched their rents below average market levels because they deemed it sustainable to themselves and attractive enough to have continued occupancy and as little vacancy as possible.
This is the commercial, competitive decision they made.

 

[RedOnion]

The market rent value is €1300 and €1000 respectively, being the amount that landlord and tenant have agreed the rent to be.

You keep referring to 'agreed', with an emphasis on the word.
Before I decide whether to respond or not, can you please set out the duration of the agreement in your scenario? I'm assuming it's a standard 12 month agreement?

 

[Palerider]

@Folsom

You are active on this thread, I will declare my hand, I would not buy to let in a fit in Ireland, the taxes are incredible....assuming you get the rent of course, there is no incentive and it is can be a challenge to get a really good tenant, don't start me on the rights, the paperwork, the RTB etc

Smaller landlords owning less than maybe 4 or 5 places have been exiting. Govt policy discourages private investment into the sector, commercial landlords are entering which distorts the real availability numbers, we are socially better off having a spread of rental unit ownership rather than large corporate block owners

If you had €150k spare and understanding Minister Murphys position tell me would you invest in Irish rental real estate stock and why.

 

[Folsom]

You keep referring to 'agreed', with an emphasis on the word.
Before I decide whether to respond or not, can you please set out the duration of the agreement in your scenario? I'm assuming it's a standard 12 month agreement?

That could differ from agreement to agreement. But taking a standard 12 month agreement (for the price of the rent, and not the occupancy) then any agreement should demonstrate that any increases thereafter are proportionate, sustainable and justified.