Slowdown in buy-to-let market due to falling rents but demand stays strong

FALLING rents and an increased supply of rental accommodation have resulted in a slowdown in the buy-to-let market over the last year, but banks continue to report strong demand among borrowers.

Last week's figures from the Irish Auctioneers and Valuers Institute, which said that Dublin rents had fallen by an average of 4% during 2003, coupled with a continued rise in property prices, suggested that landlords found the year less rewarding than in the past.

Industry estimates suggest investors now account for between 15% and 20% of the property market.

But the influence of investors has fallen from a position where they once accounted for up to one-third of the market in certain areas during the property boom. Paul Murgatroyd, an economist with estate agents Douglas Newman Good, said the increased supply of rental accommodation had restored a sense of balance to the market. He also said speculative investors, who bought properties in the hope of making short-term gains before selling, were no longer a feature.

Property remained a good investment, according to Mr Murgatroyd, who added there was no evidence of long-term investors offloading properties over the last year. He noted a growing trend towards investing in property for pension purposes as investors shied away from the perceived volatility of the stock market. Lenders also remain bullish about the residential investment market.

"We're still seeing strong demand in the buy-to-let sector, but it has eased off compared to 12 to 18 months ago," said Olive Moran of Bank of Ireland Mortgages.

Ms Moran said buy-to-let accounted for 25% of the bank's mortgage applications.

Michael Dowling of the Independent Mortgage Advisers' Federation said the market remained strong thanks to the continued confidence of professional investors.

He also said interest rates remained competitive and that mortgage brokers had seen a "lively" start to the new year.

The increased supply of rental properties has been good news for tenants.

Mr Murgatroyd said landlords faced greater pressure to provide quality accommodation and advised investors to be patient when letting properties.