1,000 rental homes now being sold each month
Property Armageddon predicted as tax-weary investors 'cash out'
Published 15/11/2015 | 02:30
More than a thousand rental properties a month have been sold by landlords over the last year, as small-time investors flee the property market, the Sunday Independent can reveal.
An estimated 13,500 residential property units have been taken out of the market since January - heaping even more pressure on an already squeezed rental market.
The grim news for hard-pressed tenants already faced with a dwindling supply of rental housing, comes a week after the Government announced a series of major reforms to provide rent certainty for both tenants and landlords. They include increasing the rent review period from one to two years, increased notice periods for rent reviews and much greater protection for tenants.
The increase in rent review periods means tenants whose rent was increased in 2015 can't have their rent increased again until 2017.
However, the legislation will do little to ease the chronic shortage of rental properties as buy-to-let investors cash in their chips.
Marian Finnegan, chief economist with Sherry Fitzgerald, said an analysis of sales trends in the buy-to-let market based on vendor and purchaser profiles, reveals approximately 13,500 rental units have disappeared from the already squeezed rental market this year as investors - typically small-time 'amateur landlords' - get out of property letting, which many are finding no longer financially viable.
"It does seem to me that we're losing a very sizeable portion of the investment property market," Ms Finnegan told the Sunday Independent.
The loss translates to more than a quarter - or 27pc - of approximately 50,000 residential units that were sold this year, almost half of which (45pc) were buy-to-let properties.
Only about 18pc of the sales of the rental apartments and houses were to other buy-to-let investors, Ms Finnegan said, meaning a sharp fall in property available to rent.
Her analysis follows warnings in a report Sherry Fitzgerald published last month which revealed that a third of property investors - the majority of which own fewer than two properties - were selling their investment properties this year.
Another 12pc of sales "were a consequence of bank repossessions, arguably many of which would be investment properties", the report found.
By contrast, only 18pc of purchasers this year were buy-to-let investors, which the report said is "an indication of a significant depletion in available rental properties which will put further pressure on the rental sector".
"We estimate that this trend will have resulted in a loss of over 40,000 units from the rental market in the period 2011 to end 2015," the report warned.
"Despite the positive story around the overall increase in (house sales) activity, the worrying mismatch between the volume of vendors selling buy-to-let properties and the quantum (number) of investors purchasing properties still persists."
The dwindling number of rental units is also reflected in the number of landlords who have registered their tenancies as required by law with the Private Residential Tenancies Board (PRTB). The number of registered tenancies - which could include any number of units owned by a landlord - dropped from 322,662 at the end of June to 319,146 by the end of October, a decline of 3,516 registered tenancies in just four months.
Eamon O'Flaherty, president of the Institute of Professional Auctioneers and Valuers (IPAV) and an auctioneer based in Maynooth, said: "We have cases like this every other week, of landlords getting out of the market while they can.
"Many landlords bought at the height of the boom. Even though their properties have come up 35pc in value since the crash, they're now able to sell and get away from it."
However, he said it's the onerous level of income tax rather than the two-year moratorium on rent increases announced by Environment Minister Alan Kelly that is driving non-professional landlords from the market.
"Joe and Mary are walking away from the market and they're the bread and butter. But we need to get more landlords into the system," Mr O'Flaherty said.
Ronan Lyons, chief economist at Irish property rental website Daft.ie, said the rental market in Dublin and elsewhere continues to shrink exponentially due to a number of factors, including population increases and a corresponding lack of new houses. The loss of another 13,500 units equates to the loss of a two months' supply of all rental vacancies. "It is definitely contributing to the problem of soaring rents due to dwindling supply and increased demand," he said.
However, both Mr Lyons and Conor Skehan, director of the State-run Housing Agency, said the exodus of small-time or amateur investors from the private rental sector isn't necessarily a bad thing - in the long term.
A survey of the private rental sector for the Housing Agency and the PRTB last year found 40pc of landlords bought property as an investment, with 36pc of respondents classified as "accidental landlords" and 19pc of that group citing the inability to sell as the reason for letting out their property.
However, the reality of being a landlord in post-crash Ireland, including paying property tax and 40pc tax on rental income as well as other fees and costs associated with rental properties, has simply made it a non-runner for many landlords, according to Fintan McNamara, director of the Residential Landlords Association of Ireland (RLAI), who points to a recent survey which found that 70pc of landlords have outstanding debts on their rental properties, yet 71pc say the rental income doesn't even cover their loan or mortgage repayments.
He wants more professional landlords in the system.