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

[Firefly]

Competition is indeed central to a free market. The clue is in the "free" part where a market is free to rise and fall due to the constituent parts of the market. This is basic law of economics supply rises to meet demand.

Herein is where we have the issue, the market is not "free" as Govt interference is distorting the market. In a normal functioning "free" market suppliers would come and go based on the attractiveness of the trading environment within that market. As the trading environment is becoming so anti landlord this is one of the reasons more landlords are leaving rather than entering it.

Exactly what I was trying to say!

 

[Folsom]

I agree its not a free market. I disagree that the housing market hasnt failed however.
Housing policy, near on twenty years has set the platform for the boom and bust. Current housing policy with RPZ are patchwork jobs.
The conditions set on housing policy are a reaction to an uncompetitive failed rental market. Im not suggesting that the policy of RPZ's will remedy the market, I dont think it will.

 

[Firefly]

Housing policy, near on twenty years has set the platform for the boom and bust.

I agree.

Government failure, in the context of public economics, is an economic inefficiency caused by a government intervention, if the inefficiency would not exist in a true free market

https://en.wikipedia.org/wiki/Government_failure

The housing market, or more specifically, the market participants are responding negatively to government interference. Despite the high rents, we do not see an influx of landlords. Why do you think that is?

Current housing policy with RPZ are patchwork jobs.
The conditions set on housing policy are a reaction to an uncompetitive failed rental market. Im not suggesting that the policy of RPZ's will remedy the market, I dont think it will.

I agree. If anything it will push up rents across the board by 4% per year, even for those properties where the landlord hadn't increased the rent for years to protect the value of their investment. And thanks to compound interest, that 4% is going to get very high very soon in cash terms.

 

[Folsom]

Herein is where we have the issue, the market is not "free" as Govt interference is distorting the market.

There is government interference in all markets through rules and regulations and taxes.
The notion of "free market" is broadly unattainable ideological mantra.
Instead, if the government can provide a level playing field for competitors (buyers and sellers) then upon that level playing field a competitive free market can emerge. But it is never truly free.

In a normal functioning "free" market suppliers would come and go based on the attractiveness of the trading environment within that market.

And that is what is happening in rental market? The suppliers are coming and going with some evidence that the trend overall is to leave. Is this a bad thing? In my view, no.
The Celtic Tiger generated an unsustainable housing boom in no small part spurred on by wanna-be landlords.
That is just my opinion. I dont think the housing crisis, as what this government is trying to resolve, will be resolved by creating the conditions to induce more people to become landlords. Its not a shortage of landlords that is the problem, its a shortage of suitable housing.
That said, those landlords that are in business deserve not to be pushed out, if that is what is happening?
I dont think it is. I think what we are seeing is the exiting of the wanna-be landlord that jumped on the bandwagon but is unable to sustain themselves in a market that is at record rents. A market correction if you will.

As the trading environment is becoming so anti landlord this is one of the reasons more landlords are leaving rather than entering it.

Perhaps, but a long-term strategy will have factored in these 'troughs', if you can call record rents on top of capital appreciation a trough.

 

[Folsom]

If anything it will push up rents across the board by 4% per year,

If you are a landlord, whats not to like about 4% increase on record high rents?

 

[Firefly]

If you are a landlord, whats not to like about 4% increase on record high rents?

You first

Despite the high rents, we do not see an influx of landlords. Why do you think that is?

 

[Folsom]

You first

There are probably a number of factors, not least the perceived notion of tenancy rights which I noted earlier;

I would agree that this is probably the biggest factor.

But the purported exiting of landlords has been largely unsubstantiated. There is certainly anecdotal evidence of larger corporate landlords entering the market. I touched on it here;

there are others who are in a position to buy with large deposits that are better generating an income from record breaking rents against sitting in deposit accounts with little interest being generated.

So if 50 bandwagon-wannabe-landlords exit the market because conditions are too tough for them and one larger, cash rich long-term strategy landlord, enters the market and buys the 50 properties then sure, there are less landlords - but is that necessarily a bad thing?

 

[Firefly]

There are probably a number of factors, not least the perceived notion of tenancy rights which I noted earlier;

There's nothing perceived about it. Have a look at the threads here and you will find countless examples of bad tenants causing great expense for landlords.

So if 50 bandwagon-wannabe-landlords

Not sure why you attach such a description - care to explain why?

There is certainly anecdotal evidence of larger corporate landlords entering the market.

Not sure why you attach such a description - care to explain why? exit the market because conditions are too tough for them and one larger, cash rich long-term strategy landlord, enters the market and buys the 50 properties then sure, there are less landlords - but is that necessarily a bad thing?

I think it's clear that the corporates are buying blocks of properties at the higher end. The single landlord operates at the lower end with a few properties.

 

[Folsom]

Not sure why you attach such a description - care to explain why?

There are good tenants as there are bad tenants. There are good landlords as there are bad landlords.
It would be my impression that in times of record breaking rents, on top of associated capital gains, that if a landlord is finding these conditions tough and need to leave then they probably never had a long-term strategy in place. I don't think it is any harm that such landlords are leaving the market.

 

[The Horseman]

There is government interference in all markets through rules and regulations and taxes.
The notion of "free market" is broadly unattainable ideological mantra.
Instead, if the government can provide a level playing field for competitors (buyers and sellers) then upon that level playing field a competitive free market can emerge. But it is never truly free.




And that is what is happening in rental market? The suppliers are coming and going with some evidence that the trend overall is to leave. Is this a bad thing? In my view, no.
The Celtic Tiger generated an unsustainable housing boom in no small part spurred on by wanna-be landlords.
That is just my opinion. I dont think the housing crisis, as what this government is trying to resolve, will be resolved by creating the conditions to induce more people to become landlords. Its not a shortage of landlords that is the problem, its a shortage of suitable housing.
That said, those landlords that are in business deserve not to be pushed out, if that is what is happening?
I dont think it is. I think what we are seeing is the exiting of the wanna-be landlord that jumped on the bandwagon but is unable to sustain themselves in a market that is at record rents. A market correction if you will.



Perhaps, but a long-term strategy will have factored in these 'troughs', if you can call record rents on top of capital appreciation a trough.

Govt intervention in any market should only cover health and safety and min standards. It should not interfere with normal market functions. Investors won't invest because they don't know what changes the Govt will bring in next.

Yes there is a shortage of accommodation but with the central bank rules people can't afford the prices being asked. We don't have enough trades to build in the quantity we want so those who are available can name their prices for any work they do. The developers need to recoup these costs so they include them in the purchase price. Institutional investors have the funds to invest in property but the Govt is giving them preferential tax treatment over individual landlords. The number of properties leaving the rental sector is higher than the numbers coming in. The Govt should be encouraging existing landlords to stay in the market while supply increases which would eventually lead to supply coming closer to demand and then having a functioning market.

With landlords leaving the market they either sell up or leave the property vacant. So either way there is a reduction of bed spaces available for rent. EG a three bed semi currently has four adults renting it. If it is sold chances are it will be sold to a couple so there is a loss of two bed spaces on the rental market. if the property is left vacant there is a loss of four bed spaces on the rental market.

Landlords are being pushed out trust me on this. I have contacts in various estate agents and they have told me the number of landlords selling is increasing all the time. You will also see a lot of landlords leaving the market as some are exempt from CGT if they bought between 2011 and 2014 and held the properties for a min of 4 yrs.

Again the above is going to impact on the number of bed spaces available in the rental market.

 

[NoRegretsCoyote]

I think people are missing the point that being a landlord generates high gross yields.

You can get approx 10% yields on apartments in certain places. Risk free rates are basically zero. This is a healthy gross margin - bigger I suspect than at any time since the 1980s.

Is it enough to compensate for the risk? That's a matter of opinion.

 

[Leo]

that in times of record breaking rents,

Perhaps for the record few new properties coming on the market, but the vast majority of properties are not achieving those record rents so why are you so convinced that those leaving the market are the ones receiving record breaking rents?

 

[Bronte]

On what grounds is this desirable? Wasn't this one of the factors that fuelled property speculation during the boom leading to too many house's been built?

No disrespect, but its turning into quite a wishlist.


Extending tax relief and incentives to property investors as you propose is interference in the free market.
Im not seeing where landlords are being pushed out. Perhaps in your own circumstance you feel it is not worthwhile being a landlord, but that is your choice. But in the main, if rents are rising, its hard to see how landlords in general would want to leave.

In every business all costs of running the business are legitmate deductable costs for tax purposes. Except for landlords. Where there is constant interference.

As for the Celtic Tiger, the reason for property speculation was because banks loaned too much silly money to people that couldn't afford it, they loaned money for property investor landlords who were only in it to do a quick turn around and had no notion of how to be a property landlord and the worst thing they did was loan on interest only to such people.

And it's not just the rent is the issue. People look at the high rents and assume landlords are making a mint. It's not actually true when you factor in all the costs, the loss of the mortgage interest, the prsi and the usc loaded on. Plus the fact it's a constant worry that you'll get a problem tenant who plays the system.

 

[Bronte]

Bacon

Some of you do not remember, but you ought to, when the government interferred and dropped mortgage interest relief for landlords it destroyed the market. That's what market interference does.

The government needs to

a) help landlords get rid of problem tenants in a timely manner
b) incentivise renovations, now they are actually doing the opposite, why renovate if you can't increase the rents, or you'll only renovate if absolutely necessary
c) stop increasing taxation (lpt, usc, prsi)
d) allow all legitimate costs as a deduction
e) stop more and more rules, new RTB annual registration nightmare coming
f) realise that rent caps mean you devalue properties
g) realise that the Reit's are driving up rents
h) realise there is more tax from ordinary landlords than tax free reits/pension funds
i) the only people making money out of Reit's is the people managing them

They also need to either build social housing or buy it.

It would also help if there was a see change in planning

j) need to go up not out
k) need to stop NIMBY
l) Dublin especially and then Cork need to go up up up ( I see Cork are doing a city change around the train station area that may revolutinsse the city, which already started there near city center - was impressed too coming in from Dublin airport - near Point depot I think)
m) Stop planners blocking developments
n) stop crazy rules about light in apartments
o) more parking should be compulsory in all developments, need to go with the continental model of every apartment having an underground parking space
p) all appartments need to have storage space, a cellar type in the basement for example, also normal on the continent

 

[Firefly]

Pretty much all covered there Bronte

 

[Folsom]

Govt intervention in any market should only cover health and safety and min standards.

For sure, and a bit more besides. Social justice, security and general welfare of the people might be factors also.

I have contacts in various estate agents and they have told me the number of landlords selling is increasing all the time.

Who are they selling too? Most likely other landlords or FTB's or people trading up? Either way or or, the property remains in circulation and is available for occupancy.

 

[Folsom]

Perhaps for the record few new properties coming on the market, but the vast majority of properties are not achieving those record rents so why are you so convinced that those leaving the market are the ones receiving record breaking rents?

Apologies, I was referring to record breaking average rents as being reported by daft.ie.

 

[Leo]

Apologies, I was referring to record breaking average rents as being reported by daft.ie.

The issues with the Daft report is that it relies solely on properties advertised on the Daft platform. It is not reflective of the overall market, and is skewed towards new rentals and misses out on long term leases that are well below the current market rate.

 

[Sarenco]

You can get approx 10% yields on apartments in certain places.

The problem, of course, is that most landlords cannot (legally) charge market rents.

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%.

For me, the (post-tax) reward was far too slim to justify the risks and hassle involved in continuing in the business. I have no doubt that many other landlords have reached a similar conclusion.

 

[Folsom]

Granted, I did think that myself. In fact the properties listed on Daft.ie at any given time are only those properties that have not obtained asking price. The actual agreed price when occupancy is taken up is not shared on daft.ie.
That said, given the volume of trade on daft.ie I dont think it unreasonable to assume that it is not too far off the mark.