The measures will result in rent increases in non-pressure zones
The Institute of Professional Auctioneers & Valuers (IPAV), has predicted that the introduction of rent pressure zone controls will lead to major increases in areas currently not designated as pressure zones. Alan Redmond, MD of Redmond Property Consultants and IPAV President, speaking ahead of a special seminar on lettings to be held at the Portlaoise Heritage Hotel this evening, February 28, said the introduction of such “crude” rent controls will have severe unintended consequences in the market.
“No consideration was given to landlords within the pressure zones who are not charging headline rents. Many such landlords did not raise rents to market level, generally because they want to hold onto good tenants. They now find they are being punished. Even where their tenants move on they are restricted to increases of no more than 4pc per year. Many among them would be servicing loans with repayments way beyond the rental income and they are paying much higher taxes than commercial landlords,” he said.
“Those outside of the designated rent pressure zones watching this injustice will be determined not to get caught by potential forthcoming controls and will move to increase rents to market level. This could involve large increases, some in the order of several hundred euro per month,” he added. Mr Redmond also said 55% of rental contracts registered with the RTB are in pressure zones but there are no official figures indicating what percentage of this 55% are earning headline rents.
He continued to say there is strong evidence that before the introduction of these rent controls late last year, "rental inflation had already started to cool." "The RTB rent report for Q3 2016 found a slowing rate of growth in rents and a fall in Dublin house rents of 0.6%,” he said. “The recent Daft report was notable, in that, in the four cities outside Dublin, rental inflation had eased back somewhat in recent months.”
He said rather than rent controls which will drive more landlords out of the sector, it is the lack of supply of properties that needs to be addressed with more intense measures. IPAV recently called on Minister Coveney and the Government to fast track the promised detailed analysis of building input costs, given the centrality of the issue to housing supply.
"The National Competitiveness Council (NCC) in its December report acknowledges that significant concerns persist in relation to the cost of development and the cost of construction," Redmond stated. Mr Redmond has said VAT was one of the input costs that may need to be addressed.
“The text of Rebuilding Ireland shows a resistance to lowering VAT on the basis that it’s already low at 13.5% but VAT typically adds an extra €15,000 to €17,000 to the price of each home. It is always paid by the buyer who is paying this from an income that has already been taxed. And if the home is bought with a mortgage the buyer is also paying interest on this money,” he concluded.
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