Warning over impact of falling rents on NAMA

By Dan Collins

Tuesday, November 17, 2009

AS rents across the country continue their downward spiral, reaching their lowest point in 10 years, an economist has warned of a consequent negative impact on the Government’s NAMA plan.

In the past three months rents fell a further 4%, according to the latest report published by the property website, Daft.ie

The national average rent now stands at €771, the lowest level in a decade.

"These recent falls in rent have pushed the average rental income back to levels last seen in 2000, which has much wider implications – NAMA was predicated on rents and yields remaining high between now and 2020," said Ronan Lyons, an economist at Daft.ie.

Dublin rents have again been most affected by the recession, falling 5% in three months.

Rents in Galway remained static, while rents in Cork and Limerick fell by 2.5%.

In Waterford, the fall was sharper, down almost 4% while elsewhere around the country, rents fell by an average of 3.8%.

Mr Lyons warned that the NAMA plan was based on property priced growing by 10% and that the housing market would be less attractive to investors if rental values continued to fall.

"Currently the yield on residential property has risen by just 0.1% in the last year, to 3.4% on average, compared to the NAMA benchmark of 6%," he said.

Rents fell by more than 18% in the year to October 2009 with average monthly rent across the country now down from more than €1,000 last year to under €775 last month.

"The more rents go down this is bad news from a NAMA long-term economic perspective," Mr Lyons said.

Daft said the total number of properties available to rent last month was almost 10% lower than in July.

"While the number of properties available to rent is still at an all-time high, it would appear that these latest price falls are starting to have a positive effect on supply," Mr Lyons said.

"In Dublin, where drops have been higher than average, the total number of properties available to rent fell by almost 8% in the past three months alone."

The Daft Rental Report is based on an analysis of all rental properties advertised on Daft.ie since January 2002, including more than 130,000 postings since January this year.

This story appeared in the printed version of the Irish Examiner Tuesday, November 17, 2009