"Well intentioned but ill advised intervention has had unintended consequences on the market." That is according to Rooney Property Consultants' new head of residential property management department, Tony Wallace.
“Rent predictability measures were new provisions enacted under the Planning and Development (Housing ) and Residential Tenancies Act 2016," he added. "While the implementation of the rent pressure zones has provided additional security to tenants living in the designated rent pressure zones in Galway, it may also deter new investors into the rental markets, and potentially reduce further the already low rental stock in areas of increasing housing demand.
"While rent controls have curbed rent increases in the short term they may also curb investment at this critical time. Markets abhor uncertainty and the constant flux around policy, taxation, and legislation has led to investors exiting the market at the precise moment when we need more investment and supply."
Mr Wallace said the current rental crisis was mainly due to the lack of supply and the current situation of unsustainable rent rises could continue until that was addressed.
In January 2017 a further 12 local electoral areas were designated including Galway City Central, Galway City East, and Galway City West.
In these areas, called rent pressure zones (RPZ ), rents will only be able to rise according to a prescribed formula by a maximum of four per cent annually. The existing requirement still applies that the rent set for a property must be in line with local market rents for similar properties and three examples of rents for comparable properties must be presented to demonstrate this.
Not all rental properties are covered by the four per cent annual rental restriction. Properties that are new to the rental market and have not been let at any time in the previous two years, and properties which have undergone a substantial change, can be exempted from the measure.
A ‘substantial change’ must be a significant change to the dwelling resulting in increased market value of the tenancy. This would involve significant alterations or improvements which add to the letting value of the property.
Mr Wallace explained: “Where a landlord is setting the rent in a rent pressure zone the amount cannot be greater than the amount determined by the below formula, the existing requirement that the rent set is not above the local market rents for similar properties still applies and three examples of rents for similar properties in the locality must be presented to demonstrate this.”
Rent increase formula
R x (1 + 0.04 x t/m )
R = The amount of rent last set under a tenancy for the dwelling (the current rent amount )
t = The number of months between the date the current rent came in to effect and the date the new rent amount will come in to effect.
m = you must enter 24 or 12
If rent reviews take place annually the permissible rent increase in each case will be four per cent. If, for example, a landlord opts to review the rent after 18 months (instead of one year ) the allowable increase will be six per cent (four per cent per annum pro-rata for 1.5 years ).
Formula examples additional requirement for new tenancies in rent pressure zone
In the case of a new tenancy in a rent pressure zone, a landlord is required to furnish the tenant, in writing, with the following information at the commencement of the tenancy:
(i ) The amount of rent that was last set under a tenancy for the dwelling;
(ii ) The date the rent was last set under a tenancy for the dwelling;
(iii ) A statement as to how the rent set under the tenancy of the dwelling has been calculated having regard to the rent pressure zone formula.
Mr Wallace further explained that the pool of tenants renting property in Galway has never been so diverse. “Previously we would have had professional couples or singles renting in the city. Now you have people who may have emigrated over the last few years and who have experienced the rental market in the UK, Australia, or elsewhere where ownership isn’t an expectation and they are coming home and saying ‘maybe I will rent for a while’.
"There has also been a growth in family lets with families from outside Ireland coming into the market looking for larger properties to rent."
Another group is what he described as the “unintended tenants” — young families who may have bought apartments during the boom time and find themselves in negative equity and therefore unable to sell. As the family grows, many of these people are opting to rent a larger house for themselves while letting out their own property.
The last couple of years have seen another new category of renter entering the market — senior staff with some of the multinationals operating in the region looking for good quality accommodation to rent for a period of time.
With supply of good quality accommodation at a premium, he believes there is a need now for more incentives to encourage investors back into the rental market.
“Landlords' margins remain extremely tight,” he says, citing high overhead costs, property tax and high rates of tax on income. “That is preventing new landlords coming to the market and it is reducing the amount of new accommodation being offered.”
“We need more action from Government. We need some sort of incentives or reductions in tax to lure landlords back,” he said, pointing out that in Limerick 80 per cent of the landlords own just one or two properties.
Mr Wallace said property has been something of an “obsession” for him ever since he was a child. He knew from an early age that he wanted to work in the property business and after completing his Leaving Cert, he set about realising this ambition.
Having served his apprenticeship, he got what he describes as his “big break” in 2007 when he got a job in property management. From there, he went on the complete a number of property courses, eventually graduating from the Limerick’s Institute of Technology with a Bachelors of Science honours degree in property valuation and management.
Serving such an extensive apprenticeship in the business has equipped Tony Wallace with in-depth knowledge around all the legislation governing the property business such as the Residential Tenancy Act and the Housing Standards regulations. Based in Rooney Property Consultants' offices on Eyre Square, he is on hand to advise on these and all others aspects of property management.
Contact Tony Wallace at 087 2621760 or email twa[email protected].