The Rent Index issued by the RTB, featuring actual rents has clearly pointed to the Two Tier System that is now in place in Ireland. Existing renters benefit from much lower rent than new entrants to the market, which is a disincentive to moving. The standardised average rent for new tenants is €1237 per month compared to €987, a 21% difference for existing tenancies.
IPOA are calling on Minister Murphy to change the law to allow properties when sold to revert back to market rent. This would encourage investors to buy properties that have previously been rented. Stephen Faughnan, IPOA Chairman stated “Rent control devalues property when selling. For investment purposes a property is valued at Cr. 20 times its income. If the income is 21% below market rate, the capital value for an investor would be 21% below market rate.
Rental properties in Rent Pressure Zones with existing low rents will either be devalued for investment purposes or will leave the private rental market, reducing the supply of accommodation.” Mr Faughnan continued “Supply is the issue and current housing policy is reducing available rental accommodation”
Figures from the RTB show the total number of private rental tenancies at the end of 2015 was 319,609 and 310,780 at the end of Q3 2018. This is a decline of 8,829 tenancies, and at the end of Q3 2018, the total number of landlords was 173,472. This compares to 175,250 at the end of 2015, a drop of 1,778 landlords.
An example of the devaluation of capital value caused by rent control.
Capital Value for Investment purposes is calculated as 20 times annual rent.
|Rental Income Per Month||Annual Rental Income||20 times Annual Rent||Devalued|
|21% below €1,185||€14,220||284,400||€75,600|