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Dan White: Rents may fall even more with glut of vacant homes

Dan White answers your financial questions

Like many people, I foolishly bought an investment property a few years ago. I have since let the property to tenants. Two years ago I was getting €1,450 per month. Now I am getting just €950. I have read that rents are rising again. Does this mean that I will be able to increase the rent on my property and if so, by how much?

INGRID

According to property website daft.ie, average Irish rents have fallen by 25pc from their February 2008 peak. This is an average figure with rents falling by much more in some areas, particularly Dublin. Worst hit have been north county Dublin and south county Dublin, where rents have fallen by 29pc and 29.5pc respectively from the peak.

However, in its latest quarterly rental report, which was published last week, daft.ie said that rents had risen by 1.4pc in January. This was the first monthly increase in rents since February 2008.

So have rents stopped falling or are we merely witnessing a temporary blip, after which rents will start to fall once again?

Supporting the argument that rents have turned the corner is that the stock of vacant rental properties has fallen sharply in recent months with daft.ie estimating that there are now one-fifth fewer properties available to rent than there were last August.

On the other hand, when one looks at the historical daft.ie data, it becomes clear that January has always been a relatively strong month for rents. Average rents fell by just 0.6pc in January 2009 but rents fell by 15.3pc in the 12 months to the end of December 2009, equivalent to an average monthly fall in rents of 1.3pc.

In other words, at least part of what happened to rents last month may have been no more than seasonal factors at work. Even if this is part of the reason for the rise in rents last month, there is some reason to believe that the rate at which rents are falling is decelerating.

Unfortunately, that is about as far as the good news can be made to stretch for Ingrid. At the same time as daft.ie was claiming that rents were rising, it was publishing figures showing that average asking prices for houses being sold fell by 19pc in 2009 with a 5.5pc fall being experienced in the final quarter of the year.

This tallies with the most recent Permanent TSB figures, which show that house prices fell by 3.6pc in the month of December alone and are now 31.5pc off their peak.

Just for good measure, research by NUI Maynooth indicates that there are over 300,000 vacant houses and apartments in the country.

While not all of these are available to rent, it does indicate that the housing market is still plagued by chronic over-supply. All of which is a long-winded way of saying that Ingrid should be in no hurry to ask her tenant to pay more rent.

I inherited some Bank of Ireland shares from my parents. Over the past three years they have lost most of their value. With the State now taking a large shareholding in Bank of Ireland, what does this mean for my shares?

MICHAEL

Last Friday the Government announced that it was taking a 15.7pc stake in Bank of Ireland. The move came after the EU prevented Bank of Ireland from paying in cash the €280m interest bill on the €3.5bn of Bank of Ireland preference shares which the Government owns.

Last week's events represent a significant dilution of the holdings of existing Bank of Ireland shareholders.

This is likely to be followed by further major dilution, if, or more likely when, the Government converts its preference shares into ordinary shares and injects even more capital when NAMA triggers further loan losses.

By the time the dust settles, existing Bank of Ireland shareholders will see their holdings reduced to a fraction of their existing level.


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