Blog post by Amy Carpenter and Owen Reilly, June 10th 2016
Commentary on the current rental market abounds, on the one hand on strong rents and double digit yields and, on the other, on private landlords divesting themselves of property as a result of punitive regulation and costs. Both experiences are the current reality. Daft.ie informed that rents nationally in Q1 2016 rose for the fifteenth consecutive quarter and the PRTB yesterday confirmed continuing strong growth, while, at the same time, professional landlord companies who build and provide serviced rental accommodation are increasingly dominant. In the prime city centre areas where the majority of our firm’s clients operate, yields do not compare to those in parts of West Dublin or Dublin’s Northside; our landlord clients primarily provide accommodation for the foreign direct investment companies locating in Ireland and, with knowledge of what is involved and long-term focus, there are opportunities for significant income generation and strong capital appreciation – and we are very pleased to observe our clients continue to do very well.
Tight management of costs and rents are key
Landlords have always paid tax on rental income but really significant charges have been added in recent years; the Private Residential Tenancies Board registration fee is €90 and Local Property Tax applies. Landlords pay annual property insurance – and service charges to management companies in the case of apartment investments – and maintenance, turnover and marketing costs are inevitable. While our investor clients last year and this year have been less reliant on mortgages, mortgage repayments may also have to be taken into account. We would strongly support 100% tax relief on mortgages to encourage landlords to stay in the market but, pending this, our advice is generally to focus first and foremost on reducing costs and then to focus on careful selection of tenants, maximum occupancy and regular rent reviews.
Strong rents, yields and capital gain
Of the sales agreed by this firm this year, 70% of properties have been bought by investors who have bought valuable properties – to rent and as long-term investments. From our experience, the current average rent for a two-bedroom apartment in Dublin’s Docklands is €2,029 and we are seeing monthly rents up to €2,300; the average rent for a one-bedroom apartment is €1,500 and we are seeing rents up to €1,800. (The rent for a three-bedroom apartment on the market currently at Forbes Quay (pictured) is €3,000.) In the Docklands where we have rented and now manage investment properties bought this year, landlords are enjoying yields of 6+% that compare favourably to any bank deposit rates currently on offer. Added to this in prime areas, landlords enjoy solid capital gains and the ability to hedge against the inflation that inevitably will come. Testifying to the demand for city centre apartments and Docklands apartments, we are seeing very strong prices per square metre; some of our clients who sold last year in Docklands realised prices per square metre that were in excess of €7,300 and this year already we have seen a highest price per square metre at Grand Canal Dock of €7,714. Residential investment is a business and those landlords who evaluate investments in a business-like way, and approach ongoing maintenance and management in a business-like way, will continue to succeed.
Blog post by Amy Carpenter and Owen Reilly
June 10th 2016