Why Property Is a Fundamentally Broken Investment In Ireland

[stormy]

I would like to illustrate to a few local TDs what is wrong with the Private Rental Accommodation market, and why its only logical no one should provide Private Rental Accommodation in Ireland. In this post I try to highlight how a landlord with existing tenants essentially has a liability on their hands if inflation spikes, and how its only logical for them to sell. This also applies to new tenancies post 1-March as they are also subject to the 2% rent increase cap (the chances of there being the touted market resets after 6 years are very low).

Using a starting rent of €100, the table below compares two paths over the last five years: one where rent tracks inflation (based on the flawed HICP index), and one constrained by RPZ rules (annual rent increase capped at lower of 2% or HICP).

								Rent Setting with Inflation	Rent Setting with Inflation	Rent Setting RPZ	Rent Setting RPZ
Annual Review Date	HICP Index	Inflation Since Oct20	Min of Inflation or 2%	Inflation Aligned Rent	RPZ Rent	Tenant Rent Discount vs Inflation	LL Running Cost 15%	LL Net Income (Inflation Rent)	LL Increase in Net Income from Oct20-Oct25	LL Net Income (RPZ Rent)	LL Increase in Net Income from Oct20-Oct25	LL Income Loss. RPZ vs Inflation Path
01Oct20	100.30	-		100.00	100.00		15.00	85.00		85.00
01Oct21	105.40	5.1%	2.0%	105.08	102.00		15.76	89.32		86.24
01Oct22	115.30	15.0%	2.0%	114.96	104.04		17.24	97.71		86.80
01Oct23	119.50	19.1%	2.0%	119.14	106.12		17.87	101.27		88.25
01Oct24	119.60	19.2%	0.1%	119.24	106.21		17.89	101.36		88.32
01Oct25	123.00	22.6%	2.0%	122.63	108.33	-14.3%	18.39	104.24	22.6%	89.94	5.8%	-16.8%

Key Takeaways:
Rent Erosion: By 2025, the RPZ rent is €108.33 versus €122.63 if aligned with inflation—a 14.3% discount for the sitting tenant.
Landlord Income Suppression: Net income rises only 5.8% over five years under RPZ rules (from €85 to €89.94) , compared to 22.6% if rents tracked inflation (€85 to €104.24). That’s a 16.8% loss in real income.
Cost Misalignment: Operating costs (e.g., maintenance, insurance, compliance) rise with inflation, not RPZ caps. This creates a widening gap between income and expenditure.
Tax and Credit Distortions: Tenants benefit further from tax credits and energy subsidies, while landlords absorb full inflationary pressure with no offset (RPRIR will be of limited benefit to many).
Policy Volatility: Investors face asymmetric risk: income is capped, costs are uncapped, and political sentiment is increasingly hostile—even before left-leaning parties have entered government.
Road to financial ruin: If the situation continues, the property simply becomes a liability. Costs increase at market rate/with inflation, while income is essentially capped below inflation (meaning net income becomes negative over time). The house will not be maintained in any meaningful way, the national housing stock in the PRS will be left to go to ruins, the investor's asset is a liability as they have to subside to pay their legal obligations (insurance, compliance, etc) as the rent doesn't cover costs, meanwhile the sitting renters are laughing all the way to the bank.

Impact: it doesn't take a genius to understand why no one would invest in such an environment. All this is before any discussion around RTB issues and the extreme regulation landlords need to deal with.

I'd welcome any thoughts / comments from others on what I have above to try and illustrate my point.

TIA

 

[Greenbook]

100% agree

The only way it does make sense is a small modern apartment or townhouse in a major city centre or near an employment hub. If you can guarantee a stream of well paid and mobile professionals, you will be able to move the rent to market each time the tenancy turns over. The risk there, of course, is government interference taking away that right or creating a imposing a rent system via the new rent register.

 

[balders93]

It is a policy choice to disincentivise being a landlord. To them a landlord out of the market is a new first time buyer getting on the ladder.

 

[Clamball]

I see you put running costs at 15% but say the house will not be maintained in any meaningful way.

You say the sitting renters are laughing all the way to the bank but yet we hear story after story about people paying significant percentages of their take home income on rent for sub standard stock with poor insulation, heating, space and facilities. 80% of private rental properties failed inspection in Cork in 2025, so the renters are suffering, some in a minor way but many are sub par.

This report says “rising rents can add significant financial strain for renters, particularly those spending more than 50 percent of their income on rent.”

Wage growth is typically 2 % a year so it is not keeping pace with inflation either.

I don’t think your arguments are balanced, so I doubt your TD will listen.

 

[Silversurfer]

The Vienna Model seems to be the preferred route being taken where 75% is social housing and 25% private. A couple with a combined income of €100,000 qualify for social housing. Waiting list of 2 years.

 

[Greenbook]

. 80% of private rental properties failed inspection in Cork in 2025, so the renters are suffering, some in a minor way but many are sub par.

Well, I'm in Cork and my properties have been inspected and every single one of them failed. This is despite the fact that I have always been very careful about alarms, window restrictors and keep everything up to a good standard. What did they fail for - weeds in the garden, weeds in the gutter, cracked tile in the bathroom, things like that. Another poster on here failed because the garden shed wasn't painted and the alarms weren't wired in despite the fact that battery operated alarms are fine per the guidelines. So when I see 80% fail, I wonder for what.

Likewise mine failed due to mould in bathrooms I have fans in the bathrooms and heaters, but this time of the year and especially if the bathroom has no window, you are guaranteed to get some mould.

There are some dreadful firetraps out there. They are not inspected at all. Why? They are not registered so the authorities don't bother with them. But those of us who try to do a proper job get tormented over weeds and cracks.

Rents are too high, you are entirely correct there, but keep in mind:

1. Any landlord who set a low rent in the past (many did for good tenants) was punished. That rent is impossible to increase beyond 2% even though costs have increased by much more.

2. If you can't increase your rent, when you come into the market first, you have to set it as high as possible. The same will apply with the new year rule. A lot can happen cost wise in 6 years and you probably won't get an increase anyway at the end of it.

3. There are not enough rental properties and high demand always drives up prices.

4. Landlords are fully taxed. REITs and pension funds pay no tax at all. I'm not arguing here for tax breaks for landlords. I'm against them. But if you charge rent of €2000 per month, you can probably take off €200 or so in tax deductible costs, so after tax you come out with €900 and some of that has to be put away because the place will need repainting, the kitchen will need replacing etc. and you need to put away money every month for that. Rent of €2000 per month makes it sound like it all goes into your back pocket. It doesn't.

I've been a landlord for nearly 30 years now. I would have always set my rent below the market rate. I never wanted to gouge and I always felt you had a better relationship with your tenants if they felt they were getting a bit of a deal. Much good that has done me with the RPZs.

 

[Greenbook]

The Vienna Model seems to be the preferred route being taken

I agree with you. My view was the PRS is really only for those who need relatively short term housing or have plenty of money and want to live in some place fancy again relatively short term. If you need long term housing you should be able to buy or have a long term German or Vienna style option open to you.

Unfortunately that is not going to happen here anytime soon. There are at least 240,000 tenancies. They are not going to replace them with social and cost rental overnight. Also, because our build costs are so high, cost rental is expensive here. What is in Vienna is in many cases about 100 years old, well built and long paid for by the housing associations there so it can be rented very cheaply. We'll be along time if ever creating that model here.

There is also the problem mentioned on other threads here that the rents charged in the past for our social housing was way too low, the Councils couldn't afford to maintain them so they were either sold off for a song or let go to rack and ruin. We built so many in the past that had it been run properly we'd have Vienna type housing here now.

 

[stormy]

I don’t think your arguments are balanced, so I doubt your TD will listen.

I may not have expressed my point clearly: the core issue is that this policy inevitably harms renters by choking off new supply. Even if we assume zero running costs, landlords have seen a real-term decline in net income of 14.3% over the past five years alone. What rational investor would commit capital to an asset class that is legally required to charge an income that doesn't keep pace with inflation?

This report says “rising rents can add significant financial strain for renters, particularly those spending more than 50 percent of their income on rent.”

I completely agree with this. My point is that if we want to incentivise supply, accommodation providers must at a minimum be allowed to maintain net income in line with inflation. I'm not suggesting that all rents should match the market rate of new supply units — only that the framework shouldn't penalise / inevitably bankrupt providers who have been locked into long term rentals.


Just to be clear, I do believe that current market rents are excessively high and unfair to renters. However, a tenant who has remained in place for the past five years has already experienced a real-terms rent reduction of 14% (even before allowing for the tax credits etc). Their current rent now sits even further below prevailing market rates, as new-supply rent growth has outpaced inflation. I think some form of rent control is a good thing as a balance is needed to avoid gouging, all I'm trying to highlight is that if the current policy continues, its simply not rational to be a LL. And the impact is going to be worse for the renter than it will be for LL (assuming LL has the option to sell to a owner-occupier).

In relation to you other points:

Wage growth is typically 2 % a year so it is not keeping pace with inflation either.

The figures below show wage growth over the past five years, broken down by enterprise size. In all cases, wages have risen in line with — or exceeded — the Harmonised Index of Consumer Prices (HICP) over the last 5 year period of avaiable data (Q2 2020 to Q2 2025).




Source: https://data.cso.ie/table/EHQ04

80% of private rental properties failed inspection in Cork in 2025, so the renters are suffering, some in a minor way but many are sub par.

I'd be very interested in seeing a detailed breakdown of the reasons behind the 80% first-time failure rate. I agree with Greenbook. From what I've seen, some of the cited reasons seem unnecessarily rigid or even absurd. For instance, a one-bedroom flat occupied by a single tenant was failed because it had a two-ring hob instead of the mandated four-ring version — despite the tenant having written to the landlord explicitly stating their preference for the smaller hob to allow more workspace. Nevertheless, the property was marked as non-compliant. Another example involved a fridge with an integrated freezer compartment. The tenant later confirmed they did not want a separate standalone freezer, yet the inspection failed the property on that basis. To pass, the landlord was forced to install an appliance the tenant neither needed nor wanted.

 

[TomEdison]

I'd welcome any thoughts / comments from others on what I have above to try and illustrate my point.

Since you ask . . .

The calculation ignores the capital value of the asset and any appreciation in that value. That seems to me a major oversight since, historically, that has been a large component of the return from investing in property.

The calculation also assumes a "norm" of rents rising with inflation but, if you think about it, there's no reason why that should be a norm. The major cost to a landlord of providing a rental property is acquiring a property to provide, but that's a sunk cost; once you've bought the house, the cost of repaying the loan does not rise with inflation. So a landlord's overall costs do not rise in line with inflation and there is no reason why the landlord's revenue should need to, or should be expected to.

Put these two points together and you're essentially saying that it's reasonable for landlords to expect an inflation-protected return on their investment plus capital appreciation on top of that. I don't think that's a reasonable expectation at all.

 

[Fortune]

the cost of repaying the loan does not rise with inflation.

The cost of paying the loan is irrelevant to the rent of the property.

 

[ClubMan]

The cost of paying the loan is irrelevant to the rent of the property

But it is an allowable cost that can be written off against rental income so surely relevant to the bottom line?

 

[TomEdison]

The cost of paying the loan is irrelevant to the rent of the property.

I think it's more relevant than the rate of inflation, to be honest.

It's relevant to the economics of the investment. OP's central argument is that in current conditions rental accommodation is an unattractive investment, but I think his attempt to show this founders because it ignores the primary cost of the investment — the cost of funding it — and also the primary return on the investment — capital appreciation.

But I suspect we agree this far: there's no more reason to expect the rent to rise in line with the cost of funding (i.e. with rising interest rates) than there is to expect it to rise in line with inflation. The tenant doesn't care what it costs you to fund your borrowings; they're your borrowings, not his. The risk that the cost of borrowing to fund the investment will exceed the return on the investment is an investment risk; it's born by the investor — the landlord, not the tenant.

 

[Fortune]

But it is an allowable cost that can be written off against rental income so surely relevant to the bottom line?

You're mixing up loan repayment with loan interest

 

[Fortune]

But I suspect we agree this far:

We do.

The tenant doesn't care what it costs you to fund your borrowings;

I once had a landlord increase my rent and he told me it was because his mother in law had to be put in a nursing home.

 

[TomEdison]

I once had a landlord increase my rent and he told me it was because his mother in law had to be put in a nursing home.

Oh, I could see why a landlord would want to increase rents to meet expenses, whether interest payments or nursing home costs. But there's no reason why he should expect that rents will increase to meet the various demands on his purse, or feel hard done by if either market conditions or regulatory constraints mean that this can't happen.

 

[Colin4444]

@TomEdison "So a landlord's overall costs do not rise in line with inflation and there is no reason why the landlord's revenue should need to, or should be expected to."

Does the cost of repairs, replacement white goods, insurance, and the myriad of other expenses faced by a landlord, which have all gone up, not matter? of course it is more expensive to be a landlord now than it has been in the past.

Plus its an investment, of course the investor is gonna be annoyed when the government introduce laws preventing them from maximising their investment.. mainly increasing the risk to the landlord..

 

[Brendan Burgess]

I would like to illustrate to a few local TDs what is wrong with the Private Rental Accommodation market,

If that is the objective, I don't think your document which appears to have been generated by AI is very persuasive. I am neither agreeing nor disagreeing with the arguments, just the layout and language.

It might be more appropriate for a Civil Service Expert Group but I can't see a TD taking time to digest it.

You need to rewrite it in their language. And then maybe back it up with an appendix containing the numbers.

Brendan

 

[stormy]

The calculation ignores the capital value of the asset and any appreciation in that value. That seems to me a major oversight since, historically, that has been a large component of the return from investing in property.

I ignored this on purpose as you can only realise the capital value if it is withdrawn from the rental market, and sold to an owner-occupier. Under the current rules and the new proposed rules, even if a house is rented below market rates the new owner is not able to increase it to market rates. The real kicker is that for tenancies from 1 March, a large LL will not be able to get vacant possession to sell the house so cannot sell to an owner-occupier.

So lets look out 10 years and we have two identical houses side by side, A & B. A is tenanted with a tenant since 1 Mar26 and B is vacant. A is owned by a large landlord so cannot get vacant possession and thus cannot sell to an owner-occupier. Do you think house A will sell for the same as house B? Is it clear A will have appreciated at all (even in nominal terms) as whoever buys it is mandated to received a rent linked to a 2026 figure but has all their costs on 2036 prices? A could easily be half the value of B (depending on the path of inflation over the next 10 years)

the cost of repaying the loan does not rise with inflation.

Isn't the main reason central banks adjust interest rates is to influence inflation? With high inflation, central banks raise interest rates to slow spending and borrowing, and when inflation is low they lower interest rates to encourage borrowing and stimulate growth.
If inflation increases, the base rate increases. If the base rate increases, the bank's cost of funding increases. This is then passed on a borrower via higher interest rates. Higher interest rates is cost to be shouldered by the borrower. If the borrower cannot then expect an increase in their own income from their investment, why would they have ever invested in property? Does this help make my point of why its not really an investment ?

Put these two points together and you're essentially saying that it's reasonable for landlords to expect an inflation-protected return on their investment plus capital appreciation on top of that. I don't think that's a reasonable expectation at all.

It's an interesting take - so if you had a lump of cash to invest, you would not expect it to maintain its value in real-terms? Over the long term, I thought that to be a reasonable expectation, otherwise why would one ever invest in property if it can't even maintain its own value in real terms (I'm not so worried about nominal)

I am neither agreeing nor disagreeing with the arguments, just the layout and language.

Thank you very much for the feedback, I'll work on layout.

Civil Service Expert Group

Thanks, it's not crossed my mind to try this. Need to figure out how to do it.

 

[Bronte]

My brothers property failed due to battery alarms. Which are legal. The inspectors are designedly looking for stuff to fail you on to justify their inspections. Which is why my current renovation project will leave a couple of easy fix things for them to “find” upon inspection.

Meanwhile absolute dives are ignored.

 

[Bronte]

It might be more appropriate for a Civil Service Expert Group but I can't see a TD taking time to digest it.

You need to rewrite it in their language. And then maybe back it up with an appendix containing the numbers.

He could start by looking at the 108 page Housing document that lays out the governments solution for housing. It’s riveting stuff. Especially in how it has no markers on how they will increase housing stock annually. A masterclass in civil service speak obfuscation. But it does have lovely photos, including one of the Taoiseach, Taniste and inept housing minister.

(On my recent flight to Ireland I was torn between reading it or rewatching Stranger Things, the document won as I was trying to figure out was there anything as a landlord, renovator, builder to incentivise me). Meanwhile the Sindo and Irish Times were analysing it and giving us two sad stories of two ladies who were unable to get on the housing ladder. Kate and Katie. Based on that and personal observation there is no housing crisis.

Happily as a landlord I handed back the keys, but am going back in at full market rent soon.