The Irish property market is undergoing a transformation, and the rental sector has been seriously affected.
Rental rates have fallen back sharply to levels last seen in the late 1990s. Would-be first-time buyers are now opting to, or are forced to, rent, creating a new ‘renting is the new buying’ trend.
That in turn is leading to a run on good quality properties, a further shortage on larger rental apartments and houses and a post property boom generation disillusioned by the country’s long-held obsession with home ownership.
The number of people buying new homes has fallen sharply. Last month, the Irish Bankers Federation/ PricewaterhouseCoopers mortgage market profile revealed that mortgage loans dropped by more than 40 per cent from 2009 levels to a total of €4.7 billion last year.
There were almost 28,000 new mortgages issued.
The average first time buyers (FTB) loan in 2010 was €185,193 - the lowest since IBF/ PwC research began, in 2005. So what can those opting to rent expect to pay? The average rent nationwide is €830, according to the latest figures from Daft.ie.
Its report, published last month, analysed the latest trends in the Irish rental market and showed that rents fell by an average of 0.6 per cent over the course of last year, compared to falls of 15 per cent in 2009 and 10 per cent in 2008, suggesting the rental market may have reached ‘‘an even keel’’.
A year-on-year analysis of rent changes throughout the country revealed that, in the last three months of 2010, rents fell across the board, except in Dublin, the largest rental market in the country.
In the capital the figures show a mixed picture. Dublin was divided by the Daft analysis into six rental zones in which rents fell everywhere except for Dublin city centre, where they rose by almost 3 per cent, and in south Co Dublin, where they rose by 2.2 per cent.
‘‘There is likely to be a shortage of good quality three and four-bedroom rental units in cities," said Ronan Lyons, who set up Daft.ie’s economic research unit seven years ago and is responsible for the website’s quarterly residential reports.
‘‘However much buyers will put up with moving further out of a city in order to fulfil their property needs, tenants want the pick of locations.
‘‘Instead of buying, would-be first time buyers are now renting and looking at rentals in terms of a five year solution.
That will put a squeeze on the three and four-bedroom rental segment, which Ireland does not have in large supply," he said. ‘‘It will also create a slight restructuring of rents where sought-after areas will enjoy a premium.
‘‘What remains to be seen is how the profile of longer term tenants over the next few years will dictate either where they live or what kind of services they’ll need.
For example, would be first-time buyers who want to start families and choose to rent for the next few years are likely to want to live in suburban areas near schools, parks, shopping centres and other amenities," said Lyons. ‘‘We may also see more of the let torent phenomenon that’s becoming more apparent in Britain.
‘‘For example, a well-paid civil servant who purchased a one-bedroom city centre apartment for €350,000 three years ago might have their property valued at €180,000 now. They can’t afford to sell it, but the
might be better off renting it out and having a tenant help cover the mortgage.
If they’re getting married, for example, they may want to rent a three-bedroom home in the suburbs.
It’s definitely a trend to watch for."
Letting, or renting, is the way forward, according to Nicola O’Callaghan, a manager at Hooke & MacDonald in Dublin.
‘‘If a property is in good condition, it will rent quickly - and we’re constantly on the look out for good quality units to rent. However, there are only so many investment properties available," she said.
‘‘The city centre will always be in high demand, even though apartments are usually older, smaller and more dated. People who will go further out of urban centres want good quality units close to frequent transport links and with more facilities available."
The profile of tenants is also changing, according to O’Callaghan. Young professionals in their mid-20s are staying at home for longer and moving out later. In general, those in their late 20s to late 30s are looking for properties to rent on their own or as couples.
One and three-bedroom rentals are most sought after, according to O’Callaghan. ‘‘A couple can share a one-bedroom unit, so it’s more affordable. In some cases it’s harder to rent a two bed, particularly if one room is a single or a more mature tenant wants the extra space but doesn’t want to share their home and can’t afford to cover the rent on a two bed.
‘‘The split in rent between three is more significant than between two parties," said O’Callaghan. ‘‘There’s only so much the average two or three bedroom unit can charge per month and we can’t value rents by size anymore. It has to based on affordability. Young professionals will usually budget about €550 to €600 per room per month.
‘‘We may start to see attitudes to home ownership shift to those shared by our European neighbours. In France, Italy, Germany and Spain people sign long-term leases for two to five years or more at a time.
‘‘It isn’t typical here, but it might start to kick in, particularly given that it’s in the interest of both parties.
The tenant has the security of a longer term lease and the landlord has a long term tenant to maintain and look after their property and pay the mortgage on it."
O’Callaghan advised landlords to be cautious when appointing a letting agent.
‘‘There’s been a large increase in letting agents recently and you don’t need a qualification to advertise yourself as one. Landlords should hire people who are familiar with tenancy laws and legislation, particularly since the establishment of the Private Residential Tenancies Board (PRTB)."
All private tenancies must by law be registered with the PRTB and the board maintains a public register of tenancies on its website.
The body replaced the courts in relation to landlord and tenant disputes. Last year, landlords accounted for almost 40 per cent of the board’s cases, many in part due to a significant increase in rent arrears cases.
‘‘Reference checking is a huge part of our service and we’ve seen an increase in false references lately," said O’Callaghan. ‘‘Some landlords don’t want to pay a 5 or 6 per cent fee, but it can backfire if their tenant is in financial difficulty and can’t pay the rent. I’m aware of one case where a tenant has been living rent free for 12 months because the landlord cannot evict them."
However, arrears cases make up a small proportion of difficulties involved in renting.
The vast majority of tenants, particularly the new profile tenants, are professionals with steady incomes and clean banking records.
They’re more mature and have higher living standard requirements than students in search of basic bedsit type accommodation.
One female architect from Dublin is a would-be first time buyer who has temporarily moved home, while searching for a place to rent in the sought after areas of Dublin 2, 4 and 6.
‘‘I’ve found landlords are more willing to negotiate than agents," she said. ‘‘Although it’s marginal, they will negotiate on price and on replacing old and stained furniture, for example.
‘‘It’s hard to find anywhere that doesn’t have storage heaters and poor facilities. Parking, balconies and extra storage are considered a luxury in Ireland.
Asking for bicycle storage has raised sniggers from agents.
‘‘I want a place with a good cooker and a washing machine and if there’s nowhere to hang out laundry, then I want a washer/dryer. Agents shrug their shoulders when you ask where to hang out wet laundry. In many cases, their attitude has been ‘well, if you don’t want the place, someone else will take it’.
‘‘I’m doing two searches," the architect said. ‘‘One is a solo search for a one bedroom unit on my own and the other is for a three-bedroom place that I can share with two friends also looking for accommodation.
‘‘Decent properties are hard to find. Landlords seem reluctant to modernise or refurbish them.
Some are looking for too high rents on investment properties that they’ve taken out high mortgages on.
The whole idea of renting is to avoid that mortgage trap," she said.
‘‘Rents are lower in newer apartments in suburban areas such as Sandyford, but you end up paying the difference in daily Luas fares and taxis at weekends."
Another young professional in her late 20s employed in Dublin city centre moved home to Wicklow temporarily while looking for suitable accommodation in the capital. ‘‘I rented with friends for years until one of our trio moved in with her boyfriend," she said.
‘‘My flatmate and I have been looking for almost three months and our search for satisfactory accommodation has been very hit and miss. One of our requirements was accommodation with two car park spaces, which has proved difficult to find.
‘‘One property had a lean-to kitchen that appeared to be part of a conservatory in a previous life. It wasn’t insulated and security at the rear of the house was an issue.
‘‘Other units were in subdivided buildings with flimsy door locks leading to small, dark and draughty rooms. If we’re paying €600 each, we don’t want to have to share washing machines or kitchens with other tenants in the building.
‘‘Another letting agent hadn’t had the apartment serviced for viewing. It was filthy and had kitchen cupboards full of stale goods and food with long since use-by dates.
‘‘I can look beyond a certain level of dirt and am happy to put on the Marigolds and give the new place a good clean, but there’s nothing you can do with a stained old mattress.
‘‘Landlords must learn that there is a certain level of standards they have to meet in order to let their property to good tenants.
‘‘Progress is also needed in terms of a deposit protection scheme to cut down on lengthy disputes."
Tuesday, March 15, 2011
Navigating the rental market | The Post