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Renting the Future

Report for

Gerard O’Neill, Chariman, Amárach Research

17 February 2009

…This is Ireland’s first middle class recession – professionals are joining unskilled workers on the dole queues. If anything, it is the Irish middle class who are bearing the brunt of this recession as they are the ones with the most debt – typically geared to both incomes of working couples. Long gone are the days of a middle class comprising working husbands and stay-at-home mums: since 2001 the majority of married women of working age in Ireland have been in paid employment. That was how the middle class fuelled the expansion of the buy-to-let market, aidedand- abetted by our over-leveraged banks.

Now it is middle class areas that are being hardest hit by the collapse in rental prices. The fastest declining rental markets in Q4 2008 were South Dublin City (-10.0%) and South Dublin County (-15.2%). The latter was the fastest declining area in the country. Of course, so far we are looking at this from the perspective of the landlords. How many of them are there? A survey last year by Amárach Research for the Irish Banking Federation showed that 15% of adults aged 25-65 own a property other than their own, down from 20% the previous year. Not all of these owners of second homes and apartments rent them out – so an even smaller minority are actually exposed to the vicissitudes of the rental market. That said, the Government’s ingenious plan to sharply increase taxes on people who own a second home might just have a few ‘unforeseen’ consequence: such as forcing those not renting out their properties to either rent them out or to sell them for whatever they can get. Expect falling rental prices and falling house prices to follow. Not to mention falling tax revenues from house sales (that are pro-rata to sales prices). But these are unforeseeable consequences don’t forget.

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