Unbelievable rental prices : Mod warning Post #2

yqtwqxqm

Another thing that seems to have been laughed off too were the predictions that all the punishment of landlords with higher taxes etc would come back on the average renter in higher rents and it was the renter who would suffer in the long run.

People were rubbing their hands with glee at the thought of landlords having to bend over and take the extra charges.

newacc2015

johnnyskeleton wrote: »

A business can claim interest as an expense if the loan is for paying other business expenses or if it was used to finance plant or machinery used in the business. You cant write off interest on a loan used to buy the business in the first place nor can the business write off interest on a loan it takes out to buy shares, for example.

So youre not comparing like for like. If a landlord borrowed €2k to pay for repairs or management fees, I think they can claim 100% of that interest. Its the interest on the money used to acquire property that is a special exemption.

http://www.revenue.ie/en/business/running/allowable-expenses.html

But if the business took out a loan to buy a premises, they would be allowed to write off 100% of that interest and not 75% if they were a residential landlord. Revenue defines a tax deductible expense as something wholly used by the business. A property for letting is wholly used for letting. It is not comparable to buying company shares in an existing business.

gaius c

newacc2015 wrote: »

People seem to think that when you pay a Landlord €1k a month for a 1 bed room apartment, that it is pure profit. Since 2007 Landlords have to pay PRSI and USC. That is 13% for most. Then they only get 75% mortgage interest relief, which used to be 100%. Meaning landlords have to taxes on rent to then pay their mortgage interest. In any other business, you can write off tax entirely. The Government doesnt see it this way. Landlords now have to pay LPT. If they are on a variable mortgage, they are generally being ripped off by their bank.

Even if a Landlord is charging €1000 a month. They are still making far less money than if they were getting €1000 in 2007. If you are looking to blame anyone for high rental prices, blame the Government for heavily taxing landlords for the last few years.

We had this discussion a while back. Full relief on mortgage interest gives investors extra financial firepower and disadvantages people looking to buy a home. A few posters even tried to argue in favour on relief on capital repayments too...

Mind you, if they ran their letting business as a proper business, they could avail of much more favourable tax conditions.

gaius c

yqtwqxqm wrote: »

Another thing that seems to have been laughed off too were the predictions that all the punishment of landlords with higher taxes etc would come back on the average renter in higher rents and it was the renter who would suffer in the long run.

People were rubbing their hands with glee at the thought of landlords having to bend over and take the extra charges.

The only thing that is laughable is thinking that increased rents are down to increased landlord costs.

It's supply and demand, nothing else.

4ensic15

gaius c wrote: »

The only thing that is laughable is thinking that increased rents are down to increased landlord costs.

It's supply and demand, nothing else.

Increased costs eventually lead to reduced supply by encouraging existing landlords to exit the market and discouraging new purchases by prospective landlords.

P. Breathnach

4ensic15 wrote: »

Increased costs eventually lead to reduced supply by encouraging existing landlords to exit the market and discouraging new purchases by prospective landlords.

Yes, but it's difficult to judge the timescale. The lag on decision-making might be 2-3 years.

RainyDay

newacc2015 wrote: »

But if the business took out a loan to buy a premises, they would be allowed to write off 100% of that interest and not 75% if they were a residential landlord. Revenue defines a tax deductible expense as something wholly used by the business. A property for letting is wholly used for letting. It is not comparable to buying company shares in an existing business.

The problem of course, is that the landlord was typically not repaying the loan at all, and was keeping it 'interest only' for the life of the mortgage, available of the state subsidy on his interest payments and putting any spare cash on deposit. If landlords hadn't gamed this one, the 75% reduction would never have come into place.

Ray Palmer

gaius c wrote: »

The only thing that is laughable is thinking that increased rents are down to increased landlord costs.

It's supply and demand, nothing else.

I really don't think people understand supply and demand correctly as it is more complex than people comment on.

Supply is determined by costs the same way demand is determined by income. When you increase landlord costs it will always be passed on as it increases the cost of supply. Supply is provided on the basis of cost plus profit. Increase costs and reduce profits less people supply. That is part of supply and demand.
Now because there is a lag in entry and exit to a market like property people don't exit the market and take reduced profit of even loss. What happens then is when the market picks up the supply side tries to catch up on the profits or losses from previous years. That makes supply aim for what is super normal profits on a short timescale but isn't to the supplier in the long term.
So yes it is supply and demand but that doesn't mean increased costs aren't a guiding factor.

4ensic15

P. Breathnach wrote: »

Yes, but it's difficult to judge the timescale. The lag on decision-making might be 2-3 years.

What of it? The rental price of a unit today depends on the supply and demand today. The rental price of a unit in 2 years time depends on what happens to supply and demand in between.

P. Breathnach

4ensic15 wrote: »

What of it? The rental price of a unit today depends on the supply and demand today. The rental price of a unit in 2 years time depends on what happens to supply and demand in between.

Time lag is very important in a market like this.

Suppliers (actual or potential) make decisions based on today's market conditions. But it might take a couple of years for decisions to be implemented (because the property market can be cumbersome, and many suppliers are small players; further, if new building is required then the timeframe can stretch even more).

In the meantime, the market is in a short-term equilibrium rather than a long-term one - perhaps with artificially-high prices. This might give a supplier expectations that are unrealistically optimistic, and lead to unprofitable investment.

In the meantime, also, the factors driving demand (employment being a big one) might change. So by the time supply has adjusted to market forces, the matket has changed.

It's almost inevitable that the Irish market for rented accommodation is volatile.

gaius c

4ensic15 wrote: »

Increased costs eventually lead to reduced supply by encouraging existing landlords to exit the market and discouraging new purchases by prospective landlords.

And properties get demolished if they are not purchased by another landlord?

And the number of landlords selling because they are in arrears on their borrowings would surely be a lot more significant that those selling because of ephemeral "costs"?

NIMAN

The only way rent prices will come down is if people stop paying the high prices, leave LLs with unrented properties, then they will reduce the price to get tenants.

Thats simple supply and demand, and obviously there is the demand at present to pay these prices.

Welcome to the free market.

murphaph

gaius c wrote: »

And properties get demolished if they are not purchased by another landlord?

Multi-occupancy dwellings (your typical 3 bed semi house share in the suburbs) being removed from the rental market and sold to young FTB families, who were previously maybe renting a 1 bed apartment which became too small for them, will obviously lead to an overall reduction in the number of units to rent. In my example the 3 former tenants renting individual rooms in the semi are now fighting for the one unit freed up by the young family vacating.

I think you are intelligent enough to already know this though.

Michael D Not Higgins

NIMAN wrote: »

The only way rent prices will come down is if people stop paying the high prices, leave LLs with unrented properties, then they will reduce the price to get tenants.

Thats simple supply and demand, and obviously there is the demand at present to pay these prices.

Welcome to the free market.

Where do these people live while waiting for the prices to come down? You're not going to stop people living where they want to live and paying for that privilege.

NIMAN

Michael D Not Higgins wrote: »

Where do these people live while waiting for the prices to come down? You're not going to stop people living where they want to live and paying for that privilege.

No idea .... and thats the free market for you, I'm afraid.

If young people can't afford rents, I guess they will live at home for longer. I am sure stats over the years have shown the age people leave home at has increased dramatically.

If you're a family, I guess you join the list of homeless we are hearing so much about. Or else downgrade? Perhaps you are 2A and 2C and are looking for a 3 bed? Maybe have to make do with a 2 bed with both kids in one bedroom?

It sounds harsh but at present there are no other alternatives. Can hardly expect LLs to lower their prices just because there is a shortgage of houses.

gaius c

murphaph wrote: »

Multi-occupancy dwellings (your typical 3 bed semi house share in the suburbs) being removed from the rental market and sold to young FTB families, who were previously maybe renting a 1 bed apartment which became too small for them, will obviously lead to an overall reduction in the number of units to rent. In my example the 3 former tenants renting individual rooms in the semi are now fighting for the one unit freed up by the young family vacating.

I think you are intelligent enough to already know this though.

Thank you for the sincere comment on my intellectual capabilities. I'm also intelligent enough to spot a self-serving anecdote when I see it. Our old apartment when sold was no longer occupied by 2 single people. It was bought by a couple with children thus the occupancy of the property doubled.

Fact of the matter is it can go either way. The only "support" for the notion that supply/demand has some sort of "costs" fudge factor is the fervent wish that it be so by folks who are part of that equation themselves.

To show how wrong you are, look at what was happening to the rental market when the ECB was dialling up the rates at the end of the noughties. Landlords attempted to "pass on" their increase in costs but the demand wasn't there, the vacancy rate shot up and rents eventually had to come down. The rental dam broke at the start of 2008 but rates stayed up until October of that year.

Any example "demonstrating" costs as a factor in increasing rents can be better explained by supply/demand and right now the simple fact is that far more people are renting than there were ten years ago and that available stock is feeble.

Michael D Not Higgins

NIMAN wrote: »

No idea .... and thats the free market for you, I'm afraid.

There is a limit to supply and demand, many assumptions are made to come up with the idealised curve and most likely doesn't take ability to pay, the inter-connectivity of the rental and sales markets and other factors into account.

My point was that the supply and demand model you propose is too simplistic and the change in the curve can be effected by a number of outside factors beyond simple number of renters v number of properties.

Tar.Aldarion

It's not just the price I have a problem with, it's the state of the apartments. They are shocking compared to other countries from my experience. Old, falling apart, no storage, damp places are a grand+ a month. Hell I think the studio apartments in Amsterdam are preferable to most one beds here (just have experience of these to compare). They are simply built to good standards.

The two year rent increase thing hit hard this year too, landlords putting up more money to cover themselves understandably. Mine was put up 150, my brothers landlord tried 300 but didn't get it in before the change came into affect.

NIMAN

Michael D Not Higgins wrote: »

There is a limit to supply and demand, many assumptions are made to come up with the idealised curve and most likely doesn't take ability to pay, the inter-connectivity of the rental and sales markets and other factors into account.

My point was that the supply and demand model you propose is too simplistic and the change in the curve can be effected by a number of outside factors beyond simple number of renters v number of properties.

Of course there will be a few other factors, but the bottom line is that if a property has a person willing to pay its rent, no matter how high it is, then we are alwats going to have a crisis.

And at present, renters must be willing to pay big money for substandard properties.

murphaph

gaius c wrote: »

Our old apartment when sold was no longer occupied by 2 single people. It was bought by a couple with children thus the occupancy of the property doubled.

Fact of the matter is it can go either way.

Oh come off it. A family buying a 2 bed apartment is much rarer than them buying a 3 bed semi and you know it.

Michael D Not Higgins

NIMAN wrote: »

Of course there will be a few other factors, but the bottom line is that if a property has a person willing to pay its rent, no matter how high it is, then we are alwats going to have a crisis.

And at present, renters must be willing to pay big money for substandard properties.

But still that's not my point, even if you coerced the entire population of renters in the country to not pay the going rate today and prices started dropping, where do you allow them to enter the market? The prices will rebound as soon as the demand is reapplied.

People are only willing to pay for substandard accommodation because there's no alternative. Our impact to the high cost of rentals must look at the alternative options, e.g. encouraging property building in the country again. You're focusing on the current effects of the market not the root causes.

MrMorooka

..

andekwarhola

When the market was a little different, forums were full of people advising others to lowball landlords with rent offers, many of whom were presumably struggling to cover mortgages with incoming rent.

As ever, most Irish people's take on how fair the market usually reflects their personal stake in it at a given time.

My wife rents her house out (above board, registered with PRTB etc) and is hardly laughing to the bank once she sorts out mortgage, LPT, tax, regularly maintaining the property etc.

pwurple

MrMorooka wrote: »

Yes, the quality of the stock is my bugbear too. I am lucky, I live in a decent flat in a terraced house that was converted into flats with a good level of care put into the design and layout. But there are limitations with the converted house model, and what we are really missing in Dublin/Ireland, it seems, are purpose-built apartments at affordable prices.

I disagree, I've lived in NYC, London, and Amsterdam, all in apartments. London and amsterdam were both converted houses. I think most of London is like that tbh.

New york was an apartment above retail, and this is where I think Dublin has oceans of space. Walk along the city streets and look UP! Vacant vacant vacant and dilapidated. I'd love to see some incentive for those to be done up and used. Location is perfect, if people could just get the fook over not having a parking space (no other major city has car parking spaces for city residents)

gaius c

murphaph wrote: »

Oh come off it. A family buying a 2 bed apartment is much rarer than them buying a 3 bed semi and you know it.

So along with folksy anecdotes, you also employ judicious trimming of quotes so you don't have to respond to pesky debunks of your posts.
I think we're done here.

Ray Palmer

MrMorooka wrote: »

Yes, the quality of the stock is my bugbear too. I am lucky, I live in a decent flat in a terraced house that was converted into flats with a good level of care put into the design and layout. But there are limitations with the converted house model, and what we are really missing in Dublin/Ireland, it seems, are purpose-built apartments at affordable prices. I check daft regularly, and just setting a max price of €1000, you see that most properties available inside the M50 seem to be flats in converted houses. The only 'normal' apartments like you would see in normal counties seem to only be available for the extremely wealthy/3 or 4 people sharing, or for short term serviced lets. It's bizarre. Seems you grow up in a semi-d in the suburbs, you rent a series of variable quality converted house-flats, until you get married and buy a semi-d yourself. It's depressing.

I think it is a bit of a strange view. The amount of building in Dublin during the boom times radically changed the housing stock make up. There were huge amounts of apartments built in the city centre and suburbs. Places that never had single small dwellings have them now.
As for Dublin being somehow unique by having converted property as rental is really weird as it is a standard form of city developments all over the world. Originally wealthy people owned large properties in the cities and at some point they move out for numerous reasons and then the property is divided up. On top of that you have old industrial units converted as businesses move out of the cities.
In Dublin the taxes drove the wealthy out of the north side of the city meaning the housing was converted first. The southside of the city retained the wealth
longer due to tax rules but then the properties were just simply too expensive to maintain so were converted into offices mostly but also split into flats.
This is city evolution and happens everywhere. I have seen some bad conversions but out number by good ones. There is a an issue with expenditure dependent on rent return, if you can't get a return to pay for top quality maintenance you just won't spend it. It doesn't mean the property is unsafe or below standard requirements just you won't get a new washing machine or well maintained decoration. There just isn't the money there and places like North Circular road have them. There is going to be an increase in rent there soon due to the college so the quality can go up but it will not be retaining original features as it will be student accommodation and needs to be easily maintained and replaced. If it was a higher rental areas better higher costing conversion would come in.

borderlinemeath

kippy wrote: »

There are multiple reasons for this, almost all can be put down to a lack of state intervention in resolving the issues the state can directly resolve (Social housing comes to mind)

The state doesn't want to intervene. Why would it? It's far more beneficial for them to hand out rent allowance to the tenant in one hand and take it back from the landlord in taxation with the other. Win/win for the government, sit back, do nothing and collect the taxes.

borderlinemeath

Landlords have to save deposits, 30% iirc, as opposed to 10% for FTB and 20% for subsequent purchases. That's a huge amount of savings to accumulate to put into a business venture that the government have made unviable for many with intervention on rent and high taxation. The asset could well depreciate, as we saw over the past decade. Not to mention how skewed the RTA is in favour of non eviction of problem tenants.

It's a huge risk being a landlord, and now with little or no reward for your long term investment is it any wonder that supply is dwindling and rents are increasing?

murphaph

gaius c wrote: »

So along with folksy anecdotes, you also employ judicious trimming of quotes so you don't have to respond to pesky debunks of your posts.
I think we're done here.

Up to you. You're the one stating that rental units leaving the rental sector do not cause a reduction in rental supply to rental demand. I disagree and have explained why. You countered with "families buy 2 bed flats too", which is a really weak argument.

You have debunked absolutely nothing of my post. It was and is entirely correct. Landlords leaving the rental sector will ultimately lead to fewer units available to rent because a single family tends to replace several tenants in a former multi occupancy unit (your typical house share). No family will move the other way given the choice. No family will move from a rented 3 bed house to a bought 2 bed apartment except in very rare circumstances.

You claim that extra landlord costs are not responsible for the increased rents, but of course they are, at least partially. It's indirect. Landlord's costs go up to a point where he decides it's not worth it and exits the sector, selling house share to young family FTBers. The family were either sharing with their parents or huddled together in a small apartment. Either way, the accommodation they free up will not replace the 3 units they "took" when they bought their semi-d. Now we have at least one, possibly three fewer rental units on the market than before, because the landlord's costs increased beyond a point he considered made sense for him.

stateofflux

NIMAN wrote: »

No idea .... and thats the free market for you, I'm afraid.

If young people can't afford rents, I guess they will live at home for longer. I am sure stats over the years have shown the age people leave home at has increased dramatically.

If you're a family, I guess you join the list of homeless we are hearing so much about. Or else downgrade? Perhaps you are 2A and 2C and are looking for a 3 bed? Maybe have to make do with a 2 bed with both kids in one bedroom?

It sounds harsh but at present there are no other alternatives. Can hardly expect LLs to lower their prices just because there is a shortgage of houses.

Its a government issue. it is completely unacceptable for a first world EU nation govt. to not deal with this as a priority duty. In the long run it will be very bad for the economy if anyone working is homeless or verging on homelessness. im lucky i am working and i have a family to fall back on if things go pear shaped. i have a lot of friends that don't