This was changed to “if the property was held for more than 4 years and less than 7 years”
So potentially a significant number of landlords ran for the exits earlier on?
Why are landlords rushing for the exits while rents are so high?
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So potentially a significant number of landlords ran for the exits earlier on?
I'm not sure why people think someone would take on a property perhaps with a mortgage of 20+yrs then sell it within 7yrs
Most LLs are not flipping properties. That's a different business.
As others have said they've made it a low yield high risk business.
Most LLs are not flipping properties. That's a different business.
As others have said they've made it a low yield high risk business.
galway_blow_in
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Because the gains during those years were enormous, they may not have planned to exit after seven years when they took out a mortgage
Assuming they made enough to pay back the mortgage and interest and a profit in 7yrs. Which I think unlikely. The numbers managing to do it would not match those leaving the market.
But why get out. It's pure profit from this point on. Even if the market falls which isn't likely in the short term. Property in the long term will still gain. They are likely to understood that if they got into it in the first place.
But why get out. It's pure profit from this point on. Even if the market falls which isn't likely in the short term. Property in the long term will still gain. They are likely to understood that if they got into it in the first place.
galway_blow_in
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What would be the point of selling and breaking even.
There's been quite a few "objective" reports saying this.
Personally I've always felt the RTB reports are selective in what information they release. They seem to play down problems and give a rose tinted viewpoint that doesn't reflect the market experience. Maybe I'm wrong.
galway_blow_in
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because legislation is so anti landlord and getting worse
I thought your suggestion was capital appreciation (well breaking even) was causing them to leave the market.
If however its just the issues of being a LL thats quite different.
PebbleBeach2020
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RTB reported last year that 2 landlord are leaving the market for every new one coming in. The number of landlords with 1 or 2 properties is falling at a much faster rate as you have the corporate landlords coming in purchasing apartments blocks.
Over the last five years since 2016, I believe the number of properties for rent has falls from 320,000 approximately to around 265,000, so that's a drop of over 17%. That's massive in such a short period of time and it's more likely to have continued in 2021 and into the next few years. You are more likely to see the figure of 265,000 properties fall before you see it rise.
PebbleBeach2020
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Some of the landlords in Ireland with one property are accidental landlords. They never wanted to become landlords but their time of purchase, the subsequent financial crash and making starting a family (kids arrived etc) forced their hand.
They now have the chance, even if it's just breaking even to get out and have less hassle in their lives.
Important to remember, that they might be breaking even, but cash flow wise, the property/rental could in all likelihood have been a drain on their cash flow. A property with a mortgage of say €1200 a month and it was rented for say €1,600 a month. That €1,600 a month might have €300 expenses a month between insurance, property tax, management fees etc. The tax man at 50% would be taking say another €600-€650 a month, so the landlord/family owning the property are getting €650-€700 into their hand but paying out €1200 a month on the mortgage. So keeping the property/rental is "costing" them €500 a month.
Yes, I know people will say they are paying down capital and will be left with an asset, but these people never wanted to be landlords in many instances to begin with, so they would rather have the extra €500 in their pockets each month at a time in their lives when they may have childcare expenses, holidays, enjoying life with kids etc.
PebbleBeach2020
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If that's the case, then the figures I've quoted above maybe understating the number of landlords leaving the market and the situation is even worse again for renters. The government need to look at the taxation of small/individual landlords imo to try and halt the slide of properties leaving the rental sector. That and looking maybe to reduce CGT, it used to be 20% and was pushed upto 33% 5-7 years ago. This would encourage landlords who use to live in the property as a PPR to keep it perhaps for rental. Finally, the uncertain and annual changing of the environment in which landlords operate needs to stop. Nothing is worse than uncertainty in any market. The proposals by SF about landlords not being allowed to sell their property with vacant possession means that landlords are giving notice now and selling immediately, as it's very hard to see SF not being in government by February 2025 or earlier.
SF's proposal is actually making things way worse for the rental market and current and future renters. This in turn is a bad reflection on the current government. So even though SF are making the situation worse, they are actually get kudos and praise and votes for doing so. How perverse is that?!!!!!
Finally, the issues of tenancies such with significantly below market rents is a big issue that is being ignored. Landlords maybe didn't bother increasing the rent for years because they had a good tenant and now that tenant has moved out they are stuck renting out at a much lower price. Rather than do this, they are selling up and the entry and exiting costs are so high in the property market, they are not returning. Exit costs are €2500 say for solicitor and 1.5% of sale price plus VAT @ 23% for estate agent. Then entry costs are 1% of purchase price for stamp duty, €1,000 for engineers survey plus VAT @ 23% and solicitor fees for €2,500 again. So to sell a €300,000 house that's 25% below market value rent and rebuy a house for €300,000 would cost the person nearly €15,000. They are not going to do that, instead, they leave a rental market that they otherwise have no reason or motivation to leave.
My suggestion to you AlbacoreA would be to get out there, and delve into the market. If you've got €3 to €400,000.00, or the facility to borrow the equivalent, buy a property, and start from there. Come back to us in around 14 months and let us know how you're getting on. I've no doubt your story will be slightly different from others, but not by a lot. The end result will be very similar. You'll also see why there's no one off answer to the question of why people with property to let are leaving the market. A bit like learning to play poker? You need to sit into a game and hey presto? You'll learn fierce fast.
Marco 1972
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Does the Housing for all document not have as an objective a commitment to review landlord issues, via the dept of finance...
NoRegretsCoyote
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There are two types of landlords leaving the market:
1) bought between 2004 and 2009, maybe accidental, usually on a tracker. Was in negative equity for a decade or more. Often after-tax profits are less than mortgage repayments. Now house prices have recovered to at or near purchase price, mortgage is paid down, landlord can sell up and walk away.
2) Bought 2011 to 2014 possibly because of Noonan's seven-year CGT exemption. Has seen capital gain of anything of 50% to 100% and once held for seven years there is zero CGT. What people forget is that these landlords start to accumulate a CGT bill for holding on to the property even if house prices do nothing as less of the uplift is sheltered. Say someone who bought in 2014 for €400k and sold in 2021 for €600k. They pocket the €200k uplift tax free. If they sell for €600k in 2023 then only 7/9 of the gain is sheltered so there is a CGT bill of 2/9*€200k*33%=€15k (approx).This is a huge incentive to sell up and start again in another type of investment.
Add to this very little incentive for punter landlords to enter the market. 4% - 5% BTL rates, tax often at 50%, CGT on the gain of 33%, rents fixed in real terms. Where is the upside? Sure the changing rules around tenancy law haven't helped but this is in so many ways a tax, tax, tax, story.
1) bought between 2004 and 2009, maybe accidental, usually on a tracker. Was in negative equity for a decade or more. Often after-tax profits are less than mortgage repayments. Now house prices have recovered to at or near purchase price, mortgage is paid down, landlord can sell up and walk away.
2) Bought 2011 to 2014 possibly because of Noonan's seven-year CGT exemption. Has seen capital gain of anything of 50% to 100% and once held for seven years there is zero CGT. What people forget is that these landlords start to accumulate a CGT bill for holding on to the property even if house prices do nothing as less of the uplift is sheltered. Say someone who bought in 2014 for €400k and sold in 2021 for €600k. They pocket the €200k uplift tax free. If they sell for €600k in 2023 then only 7/9 of the gain is sheltered so there is a CGT bill of 2/9*€200k*33%=€15k (approx).This is a huge incentive to sell up and start again in another type of investment.
Add to this very little incentive for punter landlords to enter the market. 4% - 5% BTL rates, tax often at 50%, CGT on the gain of 33%, rents fixed in real terms. Where is the upside? Sure the changing rules around tenancy law haven't helped but this is in so many ways a tax, tax, tax, story.
PebbleBeach2020
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The yields on Irish property are struggling to get 5% ROI by and large. I know an apartment in Limerick or Waterford or somewhere might get higher but by an large that's the max. Compare that to UK and you would get twice that with less regulation and more favourable tax treatment and certainty for landlords.
You are right, is it about tax and leveling the field somewhat between mom and pop landlords and institutional investor landlords but I don't see a budget in October 2022 being favourable to landlords. Sinn Fein would hammer FFG as a result.
Like I said, SF proposals are making the situation worse for renters but it's actually also bad news for the government but makes SF more popular though making the problem worse. That's how fooked up the situation is in this county.
So having read through the RTB report here: https://www.rtb.ie/images/uploads/Comms and Research/RTB_Small_Landlord_Report_July_2021.pdf
Page 105:
Future Intentions Overall, the proportion of landlords likely to sell property in the next one to five years is small – 26% of landlords said they were ‘likely/very likely’ to sell a property within the next five years. This suggests that small landlords are unlikely to exit the sector in large numbers in the short to medium term. Amongst landlords that are ‘likely/very likely’ to sell a property, the main reason given was that they ‘no longer wish to be a landlord’ (45%). Other reasons relate to profitability – ‘being a landlord is not profitable for me’ (30%) and tax - ‘taxation is too high on rental income’ (25%). One in five (19%) landlords said ‘I am retiring and my properties are my pension’ and 13% mentioned ‘the regulatory environment for landlords’. Amongst landlords that are ‘likely/very likely’ to sell a property, fewer than one in four (23%) have taken any action with regard to selling their properties. The proportion of small landlords likely to purchase another property with the intention of letting it out in the next one to five years is very small – 6% of landlords said they were ‘likely/very likely’ to purchase another property within the next five years. This suggests that only a small proportion of these landlords are likely to expand their property portfolio in the short to medium term. The expansion of the sector is therefore unlikely to be facilitated by existing small landlords. The threat of landlords reclaiming rental property is a recurring worry for tenants. Fortunately, the proportion of landlords likely to reclaim a rental property in the next one to five years for use by themselves or their family is small – 19% of properties are ‘likely/very likely’ to be reclaimed within the next five years.
My interpretation of this is the vast majority (74%) of small landlords are not rushing to exit the market
NoRegretsCoyote
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That's just not true. Look at the daft report. Yields on one-beds range from 5.6% in Dublin 4 to 13% in Dublin 17. On 3-bed houses from 4.1% to 8.7% across the country.
A landlord can easily find 8% gross yield on apartments without scraping the bottom of the barrel. To me this kind of yield is worth the risk, probably less after tax has cut it in half.
Yes, losing one landlord in twenty every year isn't a big deal. It's a problem when there are no new landlords coming to replace them, and that seems to be the issue now. BPFI data show that lending to landlords is 2% to 4% of all mortgage lending, with about a thousand mortgages every year. That's a drop in the ocean of a stock of approx 300k rented properties.
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PebbleBeach2020
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I would consider 26% of small landlords intending to leave the market within the next five years as frightening. If you consider that to be small, consider that this represents over 50,000 rental properties.
If lending is showing about a 1000 landlords buying property each year, in five years time there'll be 45,000 less rental properties available.
I just hope those tenants in these 45,000 properties buy property on the next five years and there is no other persons hoping to rent a property in the next five years. Once that happens, there's nothing to worry about.