Rental prices fall slightly, expect further slides in 2009

Dr. Stephen Kinsella, Kemmy Business School, University of Limerick.

18th Nov 2008

Dr. Stephen Kinsella is our guest blogger, analysing the Quarter 3 2008 figures.

Aggregate statistics like those presented in this report contain individual stories. One doing the rounds is the story of a man with five 100% mortgaged houses, three of which are now empty due to the downturn in construction and quickly bankrupting him month by month because he can't sell them. Stories like this will surely become more common as we move into 2009.

Rental rates are falling by 3% on average across the country. Areas outside major cities are seeing 5% drops or more since the last daft rental report. The latest data show an average decrease of more than €20 in rents, combined with a sharp increase in the stock of available rental accommodation.

Rental properties in the areas bordering major cities like Dublin's commuter belt have seen rents drop between 3% and 5%. The cities themselves fare little better, with Cork city seeing the worst decline of 5.3%, taking the average rent down to €993. It should be said that the amounts dropped are still small relative to the overall rents being charged. We are not seeing precipitous drops in the rental market...yet.

The average rent for the third quarter in 2008 in South County Dublin was €1,538. In this area, Landlords are asking for 4.8% less in rent than this time last year. The drop is costing South Dublin landlords €74 a month. A drop of €74 on €1,538? Hardly nail-biting decreases, but the trend is solid: rents are on the decline. Given the rapid falls in other areas of the property market to date, these slight sticker price discounts will not seem as dramatic, but they are indicators of a solid downward trend caused by flagging demand and chronic oversupply in certain areas.

Thanks to the downturn in the construction, and related, industries, there is also a drop in the number of people wishing to live in certain locations. Given such an increase in the stock of available rental accommodation, we should expect further rental price decreases into the new year as the market adjusts downwards once again.

Shakespeare once wrote that bad news infects the teller. At first gloss things do not look good for property owners in the rental property market, but recent developments in the international economy might offer some slight inoculation.

The European Central Bank has decreased interest rates, which perforce will decrease mortgage repayments in Ireland assuming the banks pass on those decreases uniformly. The price of oil is falling as the world economy stabilizes coming into the new year. All mortgage owners will be relatively richer as a result, including the landlord classes. Inflation is dropping as consumer demand falls, making it easier to keep a rental property in good condition.

Refurbishing or refitting a rental property to increase its likely rental rate can now be done at a steep discount, with labour and materials selling at much more competitive rates than 12 months ago. Attracting potential renters to competitively priced, well-maintained rental accommodation can now be done very cost effectively through services like, as well as local advertising and word of mouth.

In a market with too many rental properties, those wearing the buyer's hat are now firmly in control. The message to those already in rented accommodation is: if you are at all unhappy with your rental circumstances, push for improved conditions, bargain for lower rents, or move to a better place.

New entrants to the rental market should likewise bargain hard for better rental rates, rental agreements, and living conditions. Everyone renting in Ireland will feel relief from the familiar pressure of ever-increasing rents. This decrease in rents will help their bank balances, and make them a little richer, and perhaps they will spend some of that extra money, and so help the economy out of the downturn.

The rental price drops help those in some of the weakest positions in Irish society: those in need of short term accommodation in a high cost economy, migrants, and those on lower incomes. That is to be welcomed. Those with several rental properties with varying vacancy rates should look to securing emergency bridging funds for their declining investments, upgrading their properties, and squeezing property management companies to justify their fees.

Many property owners are now faced with negative equity, a situation where the realised sale price of the property is less than the mortgage owed. If the property is held for investment purposes, and selling is no longer an option, there are only two short run responses to this situation: rent the house at a rate which just covers the mortgage; or pay all or part of the mortgage yourself, and wait out the downturn.

Property owners taking the first option have caused the glut in the rental market---up from 5,000 units for rent in January 2007 to over 18,000 in November 2008. Those taking second option know it is unsustainable, unless the property owner has a large amount of liquidity, something in short supply these days. And who knows how long the downturn will last?

If our housing boom-and-bust cycle is comparable to our European neighbours, then we can expect it to take a minimum of 3-5 years for the market to recover. Holding investment vehicles like rental properties for that length of time is not sustainable by the majority of landlords, but with an oversupply of sale-able houses, individual landlords may have no choice but to rent out their property at a loss for some time to come, and make up the difference in their mortgages out of other income, or default on the loans altogether, creating a headache for the banks in the form of bad debts. I would expect to see more of each alternative in the next daft report.


National Rental Index
National Rental Index

Stock and Flow of Properties
Stock and Flow of Properties


Average Rents across Ireland in Q3 2008
Average Rents across Ireland in Q3 2008

Discuss This Article

  • Re: The Daft Rental Report Q3 2008

    Posted By: Ste - Date: Tuesday November 18, 2008 @11:46AM

    I guess this report is just giving the information that most people are aware of. The downward trend of the economy has an impact on everything. As property is (was) the biggest driver of this economy it would make sense that rents should be hit harder than most other things 9and other things are being hit very hard). The resistance on a landlord's part to lower rents is resulting in a massive increase in stock. Renters, by nature, are almost nomadic in their desire to move from one place to another if the deal is better for them. landlords needs to now sweeten the deal to attract these people and there is only one way to do it. 5% is nothing to a tenant, not worth the hassle of moving. We will have to see big drops in rental prices over the next 3 months, and we will as landlords begin to panic.

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Bill Baxter Date: Wednesday December 17, 2008 @04:55PM

    The post by "Ste -" made one point "renters are almost nomadic" and then almost immediately contradicted himself by saying that "tenants wouldn't go through the hassle of moving for less than 5% price difference".
    Not exactly nomadic then, are they? ;-)

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Brian Date: Tuesday November 18, 2008 @08:13PM

    Negotiated a 17.6% drop in rent for bigger, nicer house. 700euro for three bedroom house (this survey says I should be paying nearly 1200 euro for same!). Things are at last starting to look alot better for those financially savvy people who are prepared to wait for prices to come down further. Landlords and sellers may finally get the message that crazy money for a place to live is just not going to happen any longer. Happy negotiating everybody!

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Anonymous Poster Date: Wednesday November 19, 2008 @02:05PM

    I truly don't understand these figures...

    I live in a reputed residence in Milltown, D6, in a 4 Beds duplex appartment.
    We pay 2000 /m and the rend has not been changed for more than 3 years.
    I hardly understand how lucky I am, it's a pure bargain, but it's really far from the 2672 average for D6 I see in the report...
    So how these figures have been collected? Who give the information? landlords? Can we trust them? I suspect overpricing to maintain the market artificially at a high level.
    It would be intersting to open a survey online for tenants on daft in which they will be able to give anonymously their current renting price, number of bed, type of apartment and location... we'll get lot of surprises... :-)

    But let see what will happen within the next months.
    On Daft, lettings page, the current number of available properties is very close to 7000, it was between 5000 and 5500 two months ago...

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Anonymous Poster Date: Wednesday November 19, 2008 @04:30PM

    The report is based on properties advertised on the market during the given period - in this case quarter 3 2008. In this way the report can give indications of trends in the market i.e. are rents going up, down or staying static.

    As we explain in the "About the Report" section on page 11 - the snapshot is to be used as an indicator of average prices and not of specificities as obviously there are many factors that affect the rental price of any given property. The aim of the snapshot is to give people a general idea of what kind of prices they can expect to pay in any given area. We always recommend that people do research on the website into the type of property they are specifically interested in, and this will give them an idea of the specific prices they may be expected to pay. Hope this clarifes it for you.

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Anonymous Poster Date: Wednesday November 19, 2008 @04:51PM

    Many thx for this clear answer.

    Well, I can easily suspect these figures are an extraction of datas from daft website, related to the prices landlord give on their adverts.
    So the report depends on what landlords put on the site, but cannot reflect the real price negociated between landlords and tenants. And Daft cannot control this fact.
    But this is a good picture of what's going on on the rental market, that's true.
    Then as Dr. Stephen Kinsella correctly said in his analyze, we can "expect to see more of each alternative in the next daft report".
    So wait, wait, wait... and see... :-)

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Tenant Date: Tuesday December 23, 2008 @09:57AM

    Hi, I would like to share my feelings about asking renting price and the price that landlord agree at this stage.
    I had finished my contract in November and was looking for apartment/town house.
    One of landlady asked Euro 900 for just 1 bed room apartment in Dublin 15 which had been advertised for 3 weeks but got nothing. I rang her and asked if she's flexible to reduce the rent. She said come and see first which I did.
    It was good size one bed apartment with living room but believe me she was agreed to rent it on Euro 725 which is nearly 20% less than advertised.
    Another Agent has advertised Euro 800 for one bed room Apartment in Donabate who finally offered it in Euro 675 which is again 15% less than asking rent.
    There are numorous example in the market where when you see asking price, you won't believe owner/agent has already increased 15% rent comparing to current rental market.
    Well, the only thing I believe is a Tenant only agrees to pay the asking rental price if he/she has no other choice to that renting property or has no more time left on his/her current property contract and that's the time when Agent or Owner take the advantage.
    Every person has his/her own type situation and I would suggest never show your eagerness to move that house & you have no other choice than to move to this new property, otherwise, Agent will not negotiate the rent at all.
    A Tenant.

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Bob Date: Sunday November 23, 2008 @10:58AM

    The key factor in deciding rent levels for a landlord is the quality of the tenant as, no matter how much occupants will pay, there's no point in giving them a house if they might prove unreliable, in terms of payments and caring for the property. Indeed, it is better to forego rental income for a few months rather than getting a quick buck.

    I dont distinguish between prospective tenants on the basis of cultural characteristics but I have noticed that many new-Irish tenants pay rent exactly on time, if not early (paying in advance if taking holidays) and spend much time on making the property into a home. They undertake or organise basic maintenance works without telephoning me each time a bulb needs changing and I also place great weight on such abilities.

    All tenants should demonstrate these qualities when meeting their landlord especially if they wish to negotiate a rent reduction. The argument that other properties closeby have been let for less will not impress if the landlord has no faith in you as a future occupier of their retirement investment.

    Do not overstate the extent to which landlords are in trouble (such as a previous correspondent who anticipates imminent nation-wide panic amongst investors). The 1% interest rate reduction in the last few weeks alone saves me 500 per month on ONE house and I expect considerable savings in Dec or in the new year when rates fall further.

    So, owners wont be too bothered with a rental drop which comprises a fraction of the interest saved. Indeed, as landlords must pay tax on that portion of their income which exceeds interest and maintenance costs, the impact of any rent reduction is essentially halved for owners.

    For these reasons, I place more importance on the quality of the tenant rather than the monetary amount which they are prepared to pay.

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Brian Date: Monday November 24, 2008 @11:26AM

    It sounds like you are a decent landlord, and seem to recognise a good tenant when you have one. Good for you! However this may not be the case with a large number of Irish Landlords. My last landlord had his rent paid to him by direct debit exactly on time, had every small job done in the house by the tenants, was never called unless it was very urgent (maybe once in the year). For all this he put up the rent by 20%, citing Interest rate increases, he didn't put it down however when Interest rates started to decrease!. The house is lying empty for a number of months now. Some landlords obviously don't need to rent their houses out.... cashflow is nice though!

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Bob Date: Monday November 24, 2008 @02:44PM

    Yep, I get on with all tenants and don't increase the rent for each second year they stay, which gives both sides financial certainty. I ask them to care for the house, make it their home and not to bother me except for issues relating to the structural stability of the building or the personal safety and security of occupiers and their visitors. Its a fair deal for all (no complaints so far!!!).

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Bill Baxter Date: Wednesday December 17, 2008 @04:56PM

    Well, aren't you the big hero?

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  • Re: The Daft Rental Report Q3 2008

    Posted By: RAYMOND Date: Thursday December 18, 2008 @03:30AM

    House prices will come back in 2010. Do not sell wait and reap the benifets

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  • Re: The Daft Rental Report Q3 2008

    Posted By: JohnJoe the TD Date: Thursday December 18, 2008 @09:42PM

    Wake up....For how much longer are people prepared to live in denial.
    The Irish economy is a joke when compared with the rest of Europe, we
    are not much better at the moment than emerging post communist countries.

    Come out of the Pub and open your eyes.........bigger picture.

    The best option for Irish people to start emigrating...maybe to Poland.
    Ah, but seriously.

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Raymond Date: Sunday December 21, 2008 @12:54AM

    House prices will come back and come back big time Don't worry and keep the cash comming.
    Ireland will come back to normal no worries

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  • Re: The Daft Rental Report Q3 2008

    Posted By: bigrush Date: Sunday December 28, 2008 @01:04PM

    No way ar eproperty prices in Ireland Going to return to there highs of 2006.. well maybe in 2030.. just look at all the multinational companies pulling out because we are too expensive... the only way to get back to being competitive is for house prices to drop.. Which means people can work for less money therefore drop in wages.. Just like we are starting to see..I just hope the prices drop quickly so we can get on with things and not a long drawn out drop which will keep things like they are for years

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  • Re: The Daft Rental Report Q3 2008

    Posted By: reporter Date: Monday January 5, 2009 @11:21PM

    All of the above comments make for interesting reading.
    I am working on a report on rents for a national newspaper, wondering if any of the contributors here would participate - basic info : location of rental accomodation, price quoted, price reduction etc.
    Reply to email address and I will contact you.

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  • Re: The Daft Rental Report Q3 2008

    Posted By: Residential Investor Date: Thursday January 29, 2009 @11:10AM

    I have three residential houses which I rent out in Limerick for the past number of years. To be honest, I bought each of pre 2004 so did not pay inflated prices. The rents charged reflect this fact so the tenants benefit from a fair rent and I equally benefit from always having the properties tenanted.

    The key thing in my opinion is to view the residential letting business as a long term one i.e. 10+ years minimum. I can't see how anyone can make a return on their investment in the short term. Current the landlord is faced with a vast array of costs in order to simply maintain a house for rent in Ireland. There are PTRB costs, Income Tax, a crippling rate of stamp duty for investors that must be paid up front and for which there is no tax relief, the BES rating costs, annual servicing and certification costs for all gas applicances, the new 200 annual levy which may go to 600 per year, annual accountancy costs, advertising and management costs. Wear and tear and maintenance costs etc. etc.

    Each landlord has a responsibility to their tenants to provide a safe and clean environment. The tenant is paying for this, so it is their right. Simple as that.

    I have sympathy for those novice landlords who bought in at inflated prices and really didn't understand how much work is involved to run a property as a business. However, on the upside, the challenging economic environment will result in a higher standard of property for tenants and equally (and hopefully) a higher respect by tenants for such a property.

    One final point I would like to offer is there are lots of landlords who charge a fair rent (in relation to the costs resulting from the various taxes and levies etc), but quite often the tenant who may be renewing each year over a number of years without any increase in rent does need a wakeup call to understand and appreciate good value in relation to finding some other similar accomodation for similar rent.

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  • NcJlEHuboHm

    Posted By: Emanuel Date: Monday February 6, 2012 @02:45PM

    Get a cerdit report. See if they pay their other bills on time. See if there are any judgements against them on their cerdit report.Call their current landlord. Also call their FORMER landlord (not the place they're moving out of now, but the one before that). The current landlord might lie and say they're great tenants, just to get them out of his place;it has been known to happen. The former landlord will have no incentive to tell you anything but the truth.Oh, and when you make those calls, don't just take their word for it that their landlord is who they say. Check the real estate records and make sure the names match up. The tenant might lie, too it has been known to happen as well. Good luck.

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