Why are landlords rushing for the exits while rents are so high?

Leper

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(Extracted from a post in another thread - Brendan)

The bottom line approaching 2022 is that landlords are happy to get out of the business and tenants are paying higher rent. Did we lose our direction somewhere along the way? We are now in a classic lose/lose situation and it appears things are going to get worse.
 
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Brendan Burgess

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A very interesting question.

It makes sense for some institutions to enter the market now if they buy new properties or properties which have not been let before. They can charge as high a rent as they like and increase it after that by inflation. Any future limitations on their rights to sell won't affect them that much.

But decent individual landlords who didn't maximise the rent over the past few years are now stuck with a below market rent and massively increased limits on what they can do. They can sell their property now but they might not be able to sell it in a few years given the increasing restrictions.

They are right to get out now while they can.

So it probably suits profit-maxing institutions who are in it for the long-term. But it does not suit decent individuals who might buy one property with a view to having it available for their kids in college.

Brendan
 

PebbleBeach2020

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Absolutely Brendan. And in my experience, small individual landlords tend to have properties priced much lower than the corporate landlords. The reason we are seeing annual rent increases of say 6 or 7% (far ahead of the previous 4% permitted increase and now 2% increases) is that the new properties coming to the rental sector from corporate landlords are charging far in excess of the properties that are leaving the rental sector. The vast majority of landlords adhered to the legislation of 4% increases, but there's also a small number of rogue landlords who don't adhere to any rules no matter what.

I would expect to continue seeing 6-7% rental increases annually for the next number of years.
 

PebbleBeach2020

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But decent individual landlords who didn't maximise the rent over the past few years are now stuck with a below market rent and massively increased limits on what they can do. They can sell their property now but they might not be able to sell it in a few years given the increasing restrictions.
This is the crucial aspect for small landlords and their biggest concern. They don't care about 2% increases, they never charged market rent previously because they are not trying to maximise the achieveable rent. They were happy in the past with lower rents as they had a good tenant who probably didn't cause them much trouble etc. Now permits that tenant has moved and because the landlords was good to the last tenant, they are stuck in a situation whereby they must be equally good and nice to the next tenant.

Government should be asking themselves the question, as a time of the highest rents ever and insatiable demand for rental properties, why are landlords leaving the sector hand over fist??????? The government cannot increase the number of properties available to rent quickly enough, because they cannot even replace the properties that are leaving the rental sector.
 

Thirsty

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Rent control distorts the market; endless case studies and research is available to show how it creates a worse market for tenants, and we have exactly that situation unfolding right now.

Rent control however is politically popular and is relatively easy to implement; so instead of long term housing solutions we get short term, populist policy.

Tenure isn't a major issue, a good quality tenant paying the rent on the dot and keeping the property clean will have as long a tenure for as long as the owner remains in business.

When there is plenty of supply tenants will simply vote with their feet; owners who don't keep their property in good repair will have voids/non-payment.

Rent controls, for all that it is self-defeating exercise, won't put me out of business.
BTL finance rates won't put me out of business.
CGT, since it arises on sale, won't put me out of business.

But a non-rent paying overholding tenant, who likely will trash the property and will take c. 2 years to remove will put me out of business.

That in my view is the no. 1 reason property owners are ceasing to rent out their properties, in spite of the profits to be made.

Larger entities can subsume the losses into new rents (much as supermarkets make allowances for 'shrinkage' aka shoplifting); smaller non-corporate owners cannot.
 

Brendan Burgess

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One was bought at auction, without being able to view - he found tenants in the basement. I wont go into the gory details.

Presumably the price he paid reflected that?

These can be good buys for people who are rough enough to deal with them.

Brendan
 

Nicklesilver

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my main issue is that it is impossible to pay down debt with a marginal tax rate of 55%. Institutional investors have a market advantage through government policy.
 

ATC110

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One reason being the following example:

A landlord bought a house with tenant in-situ and the tenant arbitrarily decided to stop paying the rent.

The landlord negotiated with tenant to find an alternative property and the tenant demanded the rent arrears to be written-off and a lump-sum be paid to her to leave.

The tenant was a single mother and was implying she would report the landlord for harassment and intimidation throughout the process, despite there being none.

On moving day the tenant had her belongings in a horse box, with the rear door open and a team at the ready to move the said belongings back in if she didn't get the four-figure cash payment to leave.
 

Zebedee

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I think corporate landlords (eg so called “cuckoos”) don’t know what they are getting into. Many institutions stayed away from residential properties for years for good reason but now they are attractive due to low yields elsewhere.

The main problem is politics. While a landlord with one or two properties might get a hearing, these corporate/absentee landlords will be pilloried for putting up rent or management charges and evictions. There will be politicians harking back to the famine era. Imagine a Sinn Fein government reaction.

I think the corporate landlords are taking on a huge political risk.
 

noproblem

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One reason being the following example:

A landlord bought a house with tenant in-situ and the tenant arbitrarily decided to stop paying the rent.

The landlord negotiated with tenant to find an alternative property and the tenant demanded the rent arrears to be written-off and a lump-sum be paid to her to leave.

The tenant was a single mother and was implying she would report the landlord for harassment and intimidation throughout the process, despite there being none.

On moving day the tenant had her belongings in a horse box, with the rear door open and a team at the ready to move the said belongings back in if she didn't get the four-figure cash payment to leave.
There's plenty of landlords that would be well able to deal with said tenant, and have done so a lot more regularly than you might imagine.
 

landlord

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I believe the rent inflation figures are grossly over estimated!!!
I keep track of the number of rental properties for Swords North County Dublin on the Daft website. A few years ago there were over 200 properties for rent. The last few months The number of properties is averaging less than 20. In fact as of this morning it’s less than 10!!
So the sample daft are using to provide this rental inflation percentage is minute.
Also this sample is potentially made up of first time landlords who can charge the highest rents and those landlords re-letting who are likely also to charge the highest rents as they know no Government body is actively policing the rent pressure zone rules.
I have many rental properties and from my experience and those of my friends who are also multi unit landlords average rents are far lower than the headline numbers!! A current 2% cap on rent increases it’s not even nearly keeping up with current inflation.
Landlords are exiting the market NOT despite high rents but because of often low rents (and also partly because of a lack of Government protection from bad tenants).
 

The Horseman

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I think corporate landlords (eg so called “cuckoos”) don’t know what they are getting into. Many institutions stayed away from residential properties for years for good reason but now they are attractive due to low yields elsewhere.

The main problem is politics. While a landlord with one or two properties might get a hearing, these corporate/absentee landlords will be pilloried for putting up rent or management charges and evictions. There will be politicians harking back to the famine era. Imagine a Sinn Fein government reaction.

I think the corporate landlords are taking on a huge political risk.
I don't think they are. Institutional landlords have the wherewithal to take on the State.

The State want Institutional landlords and appear to want to drive the small landlord out. Eventually what will happen is that the Institutional landlord will control the supply in the market. They will yield the power and will dictate policy.

Rather than encourage small landlords to remain the govt are doing everything to almost force them out. Be it rent controls, low rents that the next tenant can avail of, almost impossible evictions or indefinite tenancies.

It looks like those parties on the left may form the next govt and they may be in for a nasty surprise when they try enforce their plans and the corporate landlord then uses their resources.

At which time the small landlords will have departed the market despite the warnings they have been giving to the govts current policies.
 

NoRegretsCoyote

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I have many rental properties and from my experience and those of my friends who are also multi unit landlords average rents are far lower than the headline numbers!!
I agree that yields in practice are materially less than the yields you see on Daft.

But a new landlord can achieve market rents and there are precious few of them joining either.
 

ATC110

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There's plenty of landlords that would be well able to deal with said tenant, and have done so a lot more regularly than you might imagine.
I've no idea what that means.

The landlord was "well able" to deal with the tenant.

There are plenty of landlords who've resorted to what I've described above due to getting nowhere with the RTB.

I don't imagine anything - this is what is happening regularly.
 

noproblem

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I've no idea what that means.

The landlord was "well able" to deal with the tenant.

There are plenty of landlords who've resorted to what I've described above due to getting nowhere with the RTB.

I don't imagine anything - this is what is happening regularly.
I'm not advocating it, but some landlords would use strong arm contacts, and ignore completely the RTB after a tenant becomes a complete nuisance in situations similar to what you described. Hope that helps explain a bit better what you have "no idea" about.
 

ATC110

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I'm not advocating it, but some landlords would use strong arm contacts, and ignore completely the RTB after a tenant becomes a complete nuisance in situations similar to what you described. Hope that helps explain a bit better what you have "no idea" about.
Yeah ok
 

johnfenit

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I know a friend of mine who sold one of his properties (bought in 2014) on tax advice. Evidently if property held for 7 years, no CGT tax. This would explain some of the landlords exiting.
 

Brendan Burgess

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Hi John

Good point. But they keep the CGT relief if they hold onto the building. So I don't see it as a motivation to sell.

Property acquired between 7 December 2011 and 31 December 2014​

If you dispose of land or buildings you acquired between 7 December 2011 and 31 December 2014, you can get relief from CGT in certain cases.

If the property is held for more than 7 years, relief will be given for the first 7 years.

For example, if the property was bought in January 2012 and sold in January 2022, the property would have been held for 10 years, so 7/10 of any gain will be relieved from CGT and 3/10 is taxable.
 

muinteoir

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I know a friend of mine who sold one of his properties (bought in 2014) on tax advice. Evidently if property held for 7 years, no CGT tax. This would explain some of the landlords exiting.
Does this apply if you buy the property to let and it is not the PPR before and after the tenants move out?
 
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