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Daft Rental Report Q4 2008 - Year in Review

Daft Rental Report Q4 2008 - Year in Review

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Published by Ronan Lyons
The Daft.ie Rental Report, 2008 in review
The Daft.ie Rental Report, 2008 in review

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Published by: Ronan Lyons on Feb 22, 2009
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Introduction by Gerard O’Neill, Amarach Research
 The Dat.ie Rental Report
An analysis o recent trends in the Irish rental market
2008 Q4 - The Year in Review
Introduction by Gerard O’Neill, Amarach Research
Renting the Future
| The Dat.ie Rental Report – 2008 Q4: The Year in Review
An American riend was telling me recently about his grandparents and their crazy habit (inhis opinion) o always keeping a lot o cash in the house. Under the mattress, so to speak. Hereckoned it was a consequence o their having lived through the Great Depression and witnessingover 3,000 banks ail, wiping out a generation’s savings in the process. Such ormative experiencesin our youth tend to shape our values and behaviours over the rest o our lives, long ater theexperiences have passed.Here in Ireland, a generation o young people under 30 will never look at property the same wayagain as a result o what they are now experiencing – and will experience over the next ew years. This is not a storm that will pass, loosening a ew slates on the roo. Rather, we are experiencing anearthquake that will transorm key eatures o Ireland’s economic landscape beyond recognition.As with all such economic upheavals there are social, political and cultural consequences as well.One such consequence that I anticipate is a permanent demise in the Irish love aair – inatuationeven – with property ownership. Especially debt-unded ownership. I would go urther and agreewith uturist Kevin Kelly (www.kk.org) that there’s a big uture or renting – not just property butalso or entertainment, urniture, clothes, cars, etc. Renting is the new buying. The appetite or ownership is a unction o scarcity: when ownership is eectively the onlyguarantee o access to the benets o a particular good or service then other arrangements aregrossly inerior. But when the supply o something becomes abundant – even excessive relativeto underlying demand – then ownership becomes unnecessary. We don’t own the roads we driveon nor the world wide web that we sur yet we have more or less unlimited access to all we wantwhen we want it. An ironic consequence o the recent ailures o nance-uelled capitalism maywell be to undermine orever the oundational aith in private property ownership as a source o wealth and reedom. Though ‘ironic’ doesn’t quite do justice to such an outcome.So much or the uture, what o the present? An appropriate description o many economicindicators right now is summed up by the phrase ‘cli-diving’. It’s a phrase economists have takento using to describe everything rom interest rates to trade volumes to employment to consumerspending. This is my ourth recession in my adult lie and I can saely say I have never witnessed somany indicators change direction so ast nor move so switly in the wrong direction. We’re livingin a whiplash economy, brought to a sudden stop by a wall o ear.
Continued on next page >
Gerard O’Neill is Chairman o Amárach Research.He regularly blogs on the state o the nation at www.turbulenceahead.com
Introduction by Gerard O’Neill, Amarach Research
Renting the Future
| The Dat.ie Rental Report – 2008 Q4: The Year in Review
One eature o cli-diving indices is that the rate o decline accelerates. Maximum velocity is characterised bydouble digit gures. So it is with rents in Ireland: the year-on-year rate o decline in the Dat.ie National Rent Indexaccelerated rom -3.2% in Q3 2008 to -12.2% in Q4 2008. The January 2009 rate o decline stood at -13%. Supply isoutpacing demand. This is Ireland’s rst middle class recession – proessionals are joining unskilled workers on the dole queues. I anything, it is the Irish middle class who are bearing the brunt o this recession as they are the ones with the mostdebt – typically geared to both incomes o working couples. Long gone are the days o a middle class comprisingworking husbands and stay-at-home mums: since 2001 the majority o married women o working age in Irelandhave been in paid employment. That was how the middle class uelled the expansion o the buy-to-let market, aided-and-abetted by our over-leveraged banks.Now it is middle class areas that are being hardest hit by the collapse in rental prices. The astest declining rentalmarkets in Q4 2008 were South Dublin City (-10.0%) and South Dublin County (-15.2%). The latter was the astestdeclining area in the country. O course, so ar we are looking at this rom the perspective o the landlords. Howmany o them are there? A survey last year by Amárach Research or the Irish Banking Federation showed that 15% o adults aged 25-65 own a property other than their own, down rom 20% the previous year. Not all o these owners o second homes and apartments rent them out – so an even smaller minority are actually exposed to the vicissitudes o the rental market. That said, the Government’s ingenious plan to sharply increase taxes on people who own a secondhome might just have a ew ‘unoreseen’ consequence: such as orcing those not renting out their properties to eitherrent them out or to sell them or whatever they can get. Expect alling rental prices and alling house prices to ollow.Not to mention alling tax revenues rom house sales (that are pro-rata to sales prices). But these are unoreseeableconsequences don’t orget.What then about the renters? They are spoilt or choice, pure and simple. Moreover, with the banks araid to lend andworkers araid or their jobs then the prospects or rental demand look good. And not just or one and two bedroomapartments either but so also or 3 and 4-bedroom houses. Expect a lot o people ormally-known-as-middle-class to‘downshit’ rom the mortgage-indebtedness o home ownership to the liability-reedom o renting.Such are the seismic economic and social shits now underway. Indeed the traditional snobbery and stigmaassociated with renting (‘a waste o money’ as they used to be say beore the onset o industrial scale negativeequity), will disappear aster than 100% mortgage oers. I wonder what stories this generation o renters will tell theirgrandchildren?

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