The private rental market continues to dominate housing commentary this week with The Irish Times publishing an in-depth view on the rental market and raising a series of policy challenges, titled: ‘Part of a dysfunctional property market with a worrying outlook for the Autumn’. Not many would argue with the assertion that Ireland’s property market is not working, and the rental sector is a big part of this. The early predictions about how the pandemic would impact the market – both sales and rental – have proven to be wildly inaccurate. While rent rises in the capital slowed in 2020, they are now increasing at a current rate exceeding 5.5 percent. Outside of Dublin, the rent increases have been multiples of this figure.
The Delta variant cast doubt over the proposed return to workplaces and the return of students to colleges and universities in time for the new academic year, however, it now looks possible that a gradual return might be on the cards this side of Christmas. Such a return and reopening would see increased pressure on the rental sector in every city across the country. According to the above article “supply [is] at its lowest level since data started to be collected 15 years ago”. Given this shortage of rental properties, increased demand could only drive rental prices in one direction – upwards.
The above article acknowledges that the rental market is essentially a series of smaller markets. While “smaller, private landlords remain a key player in the market, there is a steady drift away as many sell out”. Institutional landlords are criticised for the premium pricing of available stock and their willingness to leave properties vacant during the pandemic in order to avoid being locked into unfavourable terms, such was the finding of a recent survey by the Rental Tenancies Board.
Possible solutions? Irrespective of the policy perspective or agenda, supply needs to increase. From where the sector is now, looking ahead at where we need to get to, objectively, policy changes are inevitable. At Lotus Investment Group, we have always understood and acknowledged the important role that smaller private landlords play in the market. These are the investors who ensure variety in the rental offering, and in the spread of rental homes across smaller towns and villages. Any new housing supply will need to be affordable, not just for home-buyers, but for private investors. Of course, this alone will not be enough, however, it is a critical starting point (disproportionately burdensome taxation is a whole other discussion for another day).
Policymaking does not appear to have kept pace with the changing needs of property consumers. All of the available data points to shrinking households and the need for smaller homes, and this trend is not confined to the large urban areas. The Irish Times refers to the need for a “detailed public discussion on all this, in the context of how people wish to live”. These conversations are happening, but who is listening?
Lotus Investment Group