Stop the press – rents go up in January!

A quick explanation of the point that this doesn’t look like your average seasonal January effect:
January generally looks like a more optimistic version of the year just gone (that’s the seasonal element). In January 2007, the 2% jump in rents (an annualized 25% jump in rents) happened at a time of rents rising by just 10%. In 2008, the number was 1.1% (ann. 14%) compared to the yr/yr increase of 6%. In January 2009, the month/month change was -0.5%, an annualized fall of 6%, compared to the year-on-year fall at that time of 13%.
Hence my saying in the blog post: “If you showed me that graph and asked me to predict a seasonal effect of higher volume of transactions in January, I might have guessed a fall of less than 1% rather than more [than 1%], but that would be it.”

Hope that helps,

R

Ronan, you’re probably tired of being asked this question but I rarely see it mentioned when people are discussing yields as a way of guesstimating property values. It seems to be that while this might be as good a way as any to value buy-to-let, surely some economic value needs to be factored into residential property i.e. ownership, stability, discretion re changes to property, building up a long term asset etc. Do any of the models attempt to capture this ? if not then I think the rental yield model applied to PPR is a very crude metric indeed.

Enjoy the blog. John.

What are you thoughts on how changes in rent allowances might affect the market?
Theories suggest they impose an artificial floor on prices which happens to be somewhere around where they are now stabilising?

Ronan,

I renegotiated my lease in January. So I found this very interesting.
I found from researching my area in Dublin that prices had dropped by 15%. I also knew that it would cost my landlord at least a month’s rent to get a realtor to rent it. From this I was able to gain a 21% reduction in my rent for the year.
My question is how many homes are in this category of being in their 2nd or more year of rental by same occupant. As I’d imagine you could get a pretty good sense of the overall value of the market by combining the figures. Does revenue ever release figures on rent relief?
Thanks,
Pat

This is presumably a statistic compiled based on the asking rent figures on daft.ie?

If this is the case, and let’s say all of the best priced (cheapest) rental properties were snapped up in December/January, the more expensive ones left on the market would surely provide you with the upward average that is being heralded here?

Hi JL,
No, as the model/index is based on newly listed properties rather than what’s sitting on the market. An important point, so thanks for giving me the opportunity to clarify this.

R

Hi Pat,
Interesting point – I’m not sure if the Revenue do publish those stats are not, I can have a look though. Thanks,
Ronan.

Hi Ronan,
One thing I’ve observed recently is that there are an awful lot of people sharing houses and apartments now, compared to a few years ago when it was often 1 couple per property.

So if you imagine that 1 couple used to rent a property for €800, but now 2 couples pay €450 each, well then that is a 12.5%/€100 overall increase but in reality its a near 50% decrease, plus there is also an extra empty property on the market.
Judging by the surge in broadband contention issues/complaints floating around Irish forums recently, I wouldn’t rule out it out.

Excellent site btw

Hi Dan,
Thanks for that – interesting. If I follow, we would expect to see lots of excess supply and rents rising. One to watch, so.
My own opinion is that this January is a combination of usual seasonal effects and contracting supply.
R

Rónán,

As market rents have now fallen significantly below the SW support rate, the forthcoming publication of the DSFA review of rent support levels, which will be completed by 31.3.10 can only lead to a further contraction in supports. A cut of 15% or so is required, which will force rents down further. See Dáil question Ref No: 5546/10

24th February 2010
I noticed thousands of properties located in the six counties of N.I. being dumped on DAFT over the last week. This is pushing the “for sale in Ireland” graph into a steep rise!

Hi Mary,
“Dumped” is the wrong word – through daft.com, Daft Media Ltd has been expanding in Northern Ireland over the past year. This must reflect new estate agents joining the listings.

Hope that helps,
R

Well whatever way this is decribed Ronan, the daft statistics on properties for sale are gone up by nearly 6,000, almost 5% in a week as a result of these NI figures and it’s already had an impact on the shape of the graph for properties for sale. The Daft statistics are being used as indicators of the state of the property market in ROI and I just think that it creates the impression that things are getting worse down here instead of better!

Any time I see the unofficial statistics based on daft (or anyone else’s) raw listings used, I try to point out that the unofficial lists suffer from a number of problems, this being one. The stock for sale series in the Daft Report corrects for a number of issues and is restricted to the Republic only (check out the last few press releases for the real trend in stock for sale) – that is a far safer statistic and if you see anyone basing their prognoses on the property market on some raw count, feel free to point that out.
R

[…] market during Q1 2010, is out today, with a commentary by Jill Kerby. The main headline is that, as suggested by the January figure, rents are stabilising, particularly in the […]