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

landlord

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The shortage in Ireland of rental properties, (or more importantly perspective landlords) has become quite obvious.
The latest daft report is showing rental availability at its lowest level, 2700 properties as of May 1st 2019 compared to 4,400 in 2007 and average rent at an all time high of €1,366.
Average rents (on Daft) being at all time highs is a red herring, because it is only a small sample of rental properties and does not reflect the vast majority of landlords stuck at below market average rents due to rent pressure zones.
This shortage is always seen exclusively as a supply issue, but surely the government must realize that even if they are built, their must be an incentive for a perspective landlord to purchase them and that their constant interference in the rental market has only served to alienate current and perspective landlords.
Myself and many other landlords out there who bought to rent between 7th December 2011 and 31st December 2014, can now sell with no capital gains penalty.
(Initially the requirement was to hold the property for 7 years, but this was reduced to 4 years).
I am trying to understand how the minister who is dealing with a severe rental crisis due to a continued reduction in supply has not put 2 and 2, together and figured out that it is government policies that is pushing landlords out of this market.


I currently have a very appealing financial incentive to sell now with no capital gains tax to pay.

I and many others are no longer in negative equity, so I will make a profit rather than a loss by selling.

I will no longer have to worry about accepting rents way below market average, or government interference on how much mortgage interest I can claim against tax.

Druconian rental inspections (for HAP tenants only) is another headache.

As it has been and always will be politically unacceptable to side with landlords over tenants, any issues regarding non payment of rent or damage to rental properties will usually be awarded in favor of the tenant. Or at least that’s the perception amongst landlords.

And after all this time and effort, to then loose 52% to tax and LPT and RTB fees on top....


The minister must realise that it is government policy pushing landlords out of this market and aggravating this crisis.
 

landlord

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If you sell, is it possible that another landlord could buy the property?
Yep, but I guess they would have some of the same issues to consider before buying that are pushing me out of the market.
It potentially could also be bought by a home owner to live in.
 
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Leo

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Yep, but I guess but they would have some of the same issues to consider before buying that are pushing me out of the market.
If the property is in a RPZ, they would also be restricted by the rents previously charged, so automatically less attractive if you have been charging anyway below market rent.
 

Folsom

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Yes of course, but 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.

Im somewhat confused as to how the daft.e rental figures are a red herring. If the vast majority of landlords are stuck on rents below market average value, then surely the daft.ie sample, albeit a small one, would encompass a sample that reflects the vast majority of rents being charged by landlords?
The report states it identifies 54 markets (25 in Dublin, four other cities and 25 other counties.
It seems nearly improbable that daft.ie report doesn't reflect the prices of the vast majority of landlords.
 

landlord

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Yes of course, but 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.

Im somewhat confused as to how the daft.e rental figures are a red herring. If the vast majority of landlords are stuck on rents below market average value, then surely the daft.ie sample, albeit a small one, would encompass a sample that reflects the vast majority of rents being charged by landlords?
The report states it identifies 54 markets (25 in Dublin, four other cities and 25 other counties.
It seems nearly improbable that daft.ie report doesn't reflect the prices of the vast majority of landlords.
I am not aware of any body that is actively and effectively enforcing this RPZ policy. A landlord is unlikely to raise rents illegally mid contract as their is a strong likely hood that the tenant will complain, however when a tenant moves out for whatever reason and a landlord re-rents on daft, there is no body that I am aware of that is checking that the new rent is within the RPZ rules. The new perspective tenant would be far too frightened to query this with the landlord when he turns up to the viewing with 50 other couples/families.
From experience of many friends and colleagues who are landlords and have tenants move out, I know of none that are missing the opportunity of raising their rent to the market average as they know they will not get caught.
Also over the last few years the rules on renovating a property to bring it up to market rent have been taken advantage of. Although I believe this legislation is being strengthened soon.

A rather crude method showing evidence the the RPZ rules are being ignored is, look at the properties to rent in Swords today.....15 properties.
14 of them have round numbers like €1800 or €1500 etc....
Only 1 has a rent of €1388
As I rent out many properties, my rent reviews due to the 4% always require a non rounded rent figure.
I find it hard to believe that all of these 14 landlords are just rounding down the rent and missing out on the compounded extra rent.
 
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Folsom

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So what I get from that is landlord sets a price upon which a tenant agrees to pay. Upon the tenant leaving, the landlord sets a new higher rent for new prospective tenant?
This would explain the increasing rents as reported by daft.ie.
Im failing to see how this equates to Minister Murphy actively pushing landlords out of the market.
 

landlord

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So what I get from that is landlord sets a price upon which a tenant agrees to pay. Upon the tenant leaving, the landlord sets a new higher rent for new prospective tenant?
Yes from my experience this is frequently happening. But not just a new higher rent, but a rent which far exceeds the 4% limit.

Im failing to see how this equates to Minister Murphy actively pushing landlords out of the market.
For me to stay in this market, I would like to see the minister extend the capital gains tax incentive beyond 7 years, allow the free market to dictate rents, provide assurances that the ability to offset investment mortgage interest will not be restricted again, allow LPT to be offset against rental profits and provide equal rights for landlords as tenants receive regardless of the political consequences.
 

Folsom

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For me to stay in this market, I would like to see the minister extend the capital gains tax incentive beyond 7 years,
Im not familiar with this incentive, but it sounds generous as it is.

provide assurances that the ability to offset investment mortgage interest will not be restricted again,
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?

allow LPT to be offset against rental profits
No disrespect, but its turning into quite a wishlist.

allow the free market to dictate rents,
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.
 

Sarenco

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Just on LPT, the previous Minister for Finance, Michael Noonan, said on at least two occasions that LPT should be a deductible expense for income tax purposes. He just didn't do anything to make it so. Nor has the current Minister for Finance.

I don't think anybody seriously disputes that there has been a net reduction in the number of residential landlords in recent years. The RTB recently expressed concern at the reduction in the number of registered tenancies. The IPAV estimated last year that there are two landlords leaving the market for every one that enters. Daft suggests that the number of rental properties on the market is at an all time low.

So why would landlords exit a market at a time when rents are rising so strongly? Seems bizarre, no?

It seems pretty obvious to me - unfair taxation and onerous, unbalanced regulation.

That's why I threw my hat it some time ago. I simply couldn't justify staying in a business where the net, after-tax profits were so slim relative to the risks involved. And the uncertainty introduced by the ever increasing regulatory burden? I'd simply had enough.

For those landlords that have stayed in the game, you have my respect. For me, life is too short.

There are easier ways to make a buck.
 

The Horseman

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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.
Investors of any nature are happy to contend with the normal ups and downs of a market, the standard laws of economics show that supply will increase once supernormal profits are available until there is enough suppliers to reduce supernormal profits to normal profit. This is how a normal market functions.

The market is not being allowed to find its own equilibrium, landlords are leaving because of the high taxation, the tenant based support, the anti landlord stance etc. With the Govt constantly interfering in the market investors wont invest because they are trying to second guess what law the Govt will introduce next.

Investors accept the whole idea of the law of economics and adjust their business strategy accordingly, what they can't do is adjust it to changes in the law. Changes in the law of economics impacts the individual within the market, changes in law introduced by the Govt impacts on everybody which removes an individuals competitive advantage gained through their specific circumstances.
 

NoRegretsCoyote

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I don't think anybody seriously disputes that there has been a net reduction in the number of residential landlords in recent years. The RTB recently expressed concern at the reduction in the number of registered tenancies. The IPAV estimated last year that there are two landlords leaving the market for every one that enters. Daft suggests that the number of rental properties on the market is at an all time low.
Not so clear. The Census showed no decline between 2011 and 2016 in private rented households. RTB has no clue really because no one has to tell them when a tenancy ends.

Personally I am indifferent if it is small-time landlords or institutions. It's the number of units that matters.
 

Ceist Beag

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I'm not convinced that high taxation is a strong motivation for landlords leaving the market. There is still plenty of money being made by landlords and nett return on investment is still an attractive one as far as I can see. I think the bigger factor might be the imbalance in any dispute between landlords and tenants and the difficulty of getting rid of bad tenants if you are unlucky enough to end up with some. The risk of this may well prompt landlords to consider it not worth it. However on the flip side I never buy this argument of landlords complaining that they cannot achieve the "market rate". You should enter the market knowing your numbers and operate on that basis and it really isn't an argument to complain because someone else is achieving a higher rent than you are allowed to achieve. That just equates to jealousy and greed imho. If the rate you are charging is not giving you an adequate return then why did you enter the market in the first place? Obviously there may be exceptions to this, e.g reluctant landlords who could not sell due to NE, so my point is a general one.
For the record we're landlords and rent at well below the "market rate" and are happy to do so because the rent we receive is what we were happy to rent for when we first decided to enter the market (allowing for inflation). We currently have excellent tenants and would be happy to keep the status quo. Our biggest concern is what would happen if we ever got new tenants who were not so good - hearing the many horror stories and how the law seems to be very heavily in favour of tenants is the one area we would like to see addressed. The financial side? Not so much.
 

Sarenco

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@Ceist Beag

Would you be happy to offer your property to a new, unknown tenant at substantially below market rent? That's what the regulations will now force you to do if and when your current tenant leaves.

Obviously everybody's tax situation is different but in my case I only got to keep ~40% of any net rental profit (having regard for my marginal tax rate and the various non-deductible expenses). For me, the (post-tax) reward was just too slim to justify the risk involved in continuing in the business.
 

Andrew365

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I have a small sample base of evidence that landlords are leaving the market in numbers.... For the first 3 months of the year I was viewing apartments for sale in a large apartment development in Dublin 4. In the end I saw about 8 properties in the development and out of the 8 only two were owner occupied. For 4 of the 6 the agent indicated that they were under RPZ and the current rent allowed was below market rate. Lastly of the 6 landlord properties 4 of them were empty.

What I can deduce is that whilst the income from properties is taxed more now it is more the increase in the market value of the properties that are driving landlords to sell up and cash in.

As an FYI I bought an apartment in part with a view to rent it at a later stage but having run the numbers I agree with the sentiment here that the risk / reward is too high. I bought in the short-term as mortgage is significantly less than my rent was and I now have security and no risk of a landlord deciding to get out of the market and leave me competing with everyone else again for property!
 
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Ceist Beag

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@Ceist Beag

Would you be happy to offer your property to a new, unknown tenant at substantially below market rent? That's what the regulations will now force you to do if and when your current tenant leaves.

Obviously everybody's tax situation is different but in my case I only got to keep ~40% of any net rental profit (having regard for my marginal tax rate and the various non-deductible expenses). For me, the (post-tax) reward was just too slim to justify the risk involved in continuing in the business.
Yes I would. For one there are always many variables at play as to what any other property can be rented out at, secondly I am not motivated by what anyone else is receiving, thirdly life is too short to be looking at always maximising my return. As I said, if you're in the market you should know what numbers work for you and that is all that should be important - not what anybody else is getting.
 

The Horseman

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Yes I would. For one there are always many variables at play as to what any other property can be rented out at, secondly I am not motivated by what anyone else is receiving, thirdly life is too short to be looking at always maximising my return. As I said, if you're in the market you should know what numbers work for you and that is all that should be important - not what anybody else is getting.
Investors entered the market having "done their numbers" eg rent is expected to increase by X plus 10% per year due to the limited supply of properties. Sounds like a good investment so do it, now rents could rise by X plus 10% as that's the market rate but you can only increase it by X plus 4% (in RPZ) so your investment was based on growth of X plus 10% but you are restricted to X plus 4%.

Investing is a long term strategy and changes in the law distort the laws of economics.

Great if you are not motivated by achieving the highest return on your investment, it would appear you are in a better financial position than others. Well done to you. If you want to follow philanthropic pursuits by renting below market rate then work away.
 

Folsom

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I think the bigger factor might be the imbalance in any dispute between landlords and tenants and the difficulty of getting rid of bad tenants if you are unlucky enough to end up with some.
I would agree that this is probably the biggest factor. I dont see how affording tax relief and other financial incentives to landlords will help avoid bad tenants.
In the main, if you have set out a business plan for yourself and crunched the numbers you will have deduced whether or not it is financially viable to enter the rental market as a landlord.
Those complaining (not you) about not being able to charge average "market rates" is a false dichotomy as below average rates, as do above average rates, feed into the average market rate as a whole. If below average rates are increasing, the the overall average rate is increasing.
 

Folsom

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Investors entered the market having "done their numbers" eg rent is expected
I think that is part of the issue, "expectation". As you mention, investing is a long-term strategy. There will be peaks and troughs. Im all for free market trading, but the government will always set out the platform for everyone upon which that free trade is to operate.
What is missing from the general discourse of landlords is talk of competition. Landlords offering rents below average market rates are simply more competitive. Instead, the discourse appears to be that x is charging a particular rent, so why cant I?
 

Sarenco

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Yes I would. For one there are always many variables at play as to what any other property can be rented out at, secondly I am not motivated by what anyone else is receiving, thirdly life is too short to be looking at always maximising my return. As I said, if you're in the market you should know what numbers work for you and that is all that should be important - not what anybody else is getting.
Fair enough.

I can certainly see why you might be happy enough to accept a discount on the market rent from an existing, reliable tenant. But to be happy offering a discount to somebody with whom you have had no prior experience seems very odd to me. He could default on the rent, destroy the property, etc.

If I'm putting my capital at risk, I have an expectation (but no guarantee) that I will be appropriately rewarded.

Rent controls and unfair taxation materially skew the risk/reward profile of the residential letting business. I decided I was no longer being adequately rewarded for the risk I was carrying so I put my money elsewhere.
 
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