Comments on: CSO reports Irish residential rents rising 3.1% annually

By: who_shot_the_tiger

who_shot_the_tiger — Sat, 25 Feb 2012 12:57:47 +0000

“Lloyds has taken provision for losses equal to about 70pc of its impaired mortgages’ value, well above the norm for other banks. “The Lloyds experience in Ireland reflects some of our concerns over the potential for further deterioration in the loan portfolios at the Irish banks,” NCB banking analyst Karl Goggin told clients.”

Down 70% and counting (are you listening NAMA?)….. Little wonder that rents are increasing as people opt to lease rather than buy. There is NO activity whatsoever in the Irish new homes market.

By: Ahura M

Ahura M — Fri, 24 Feb 2012 11:26:01 +0000

Thanks NWL, though I’m not sure I made my alternative ‘possibility’ clear. To a large extent I agree with your reply. There is one dynamic that might be distorting the measurement system and the calculation of average rental price. Here’s a simple example of what I’m thinking.

Say in Dec 2010, suburb X has 200 private rental properties with rents ranging from 700 to 1800. Assuming an even distribution across the range, the average private rent for suburb X is 1250.

If the lowest quality 10% of properties have decided life is easier on the RAS and for simplicity, we assume the bottom 20 of the evenly distributed range leave.

So this gives us Dec 2011, suburb X has 180 private rental properties with rents ranging from 810 to 1800. Making same assumptions the average rent is 1305 or an increase of 4.4%.

Or in short, you don’t need price increases for the average to increase. It may be the case that the CSO adjust for this or it may also be true that this dynamic is not significant. I don’t know, but it would be nice to figure it out.

By: namawinelake

namawinelake — Fri, 24 Feb 2012 10:36:02 +0000

@Ahura, I think settled rents are a tug of war between landlords and tenants. Landlords have rising costs, a desire to see an investment return on their property, theoretically more demand as potential buyers defer buying in a falling market and banks that mightn’t want to see uneconomic rents agreed. Tenants have less income, theoretically more choice as vacant homes should be forced onto the market as banks foreclose. There is imperfect information on what going rents are – the PRTB should be able to produce anonymised information but doesn’t – which might assist landlords more in setting asking prices. The 2012 prediction on here made in December 2011 was that residential rents would increase 0-5% in 2012, and then the rent assistance reductions were announced with average decreases of 13%, and I would tend to say rents will remain flat over the year with decreases in Mar/Apr/May as the rent assistance reductions kick in, and then modest increases.

By: Ahura M

Ahura M — Fri, 24 Feb 2012 10:24:08 +0000

@ NWL,

Although the increase isn’t huge, any increase is surprising. At a high level, the easy explanation is people are no longer buying properties and increasing demand for rental. In a way, this makes sense.

Though there is an alternative, which would be good to knock on the head one way or another. X% of previously privately rented accommodation has moved to RAS (and other similar schemes) over recent years. It is reasonable to assume that these were likely to be ‘less desireable’ than average (i.e. not able to place privately go to state). In turn, the average ‘desireability’ of the remaining private rental pool increases. This would result in higher average private rents without private rents increasing just ‘lower rents’ leaving the private market. What do you reckon?

By: Eamonn Moran

Eamonn Moran — Thu, 23 Feb 2012 16:50:24 +0000

The sad reality is the the laws of supply and demand are often counter weighted with other heavier laws. The laws of vested interests, the laws of the protected elites.

By: Conan Drumm

Conan Drumm — Thu, 23 Feb 2012 16:21:58 +0000

If the building of housing is supported with tax breaks – many ghost estates exist for this reason – then they weren’t really built to be occupied. That accounts for why they are often in places with no amenities or services where no one wants to live.

By: Conan Drumm

Conan Drumm — Thu, 23 Feb 2012 16:18:12 +0000

The argument was made that housing provision should be left to the market… ie the state should disengage. This was accepted on the basis that land and building costs had gone through the roof (200,000 a house). But the state was pricing itself out of social housing provision by pushing up costs and investor demand because it was generously underwriting investor risk with rent allowances.

Then there were those Bacon reports with deal swops on social housing provision, so that market values would not suffer from having socially housed neighbours…

By: Wendy Howell

Wendy Howell — Thu, 23 Feb 2012 16:02:22 +0000

There is a Nobel prize in Economics awaiting for whoever figures this nonsense out.

By: Wendy Howell

Wendy Howell — Thu, 23 Feb 2012 15:59:52 +0000

@OMF

In the dysfunctional commercial rental market, rent is the symptom the lease law is the disease.

By: Wendy Howell

Wendy Howell — Thu, 23 Feb 2012 15:57:49 +0000

@OMF

Where are the phantom investors for the ghost estates?