2020 has been the most challenging year in memory for many industries in Ireland, and Buy-to-let is no exception.
After one of the longest runs in rising rents since the days of that infamous feline, the bubble had already begun to deflate at the beginning of 2020. Now as we get ready for 2021, many changes are expected due to a post coronavirus world.
The next 6-12 Months
It will be no surprise to learn that rental prices in Ireland have come under huge pressure over the last 12 months. Unemployment figures are worrying and obvious this will translate to many tenants unable to make their payments. How long this will take to recover is a complete unknown at this point. This factor alone could have a big impact on rental prices.
Another major factor to consider is the huge increase in available rental properties. Daft.ie has reported an increase of 40% in the number of rental properties on the market in 2020 compared to 2019. This will have obvious effects on the whole market, but when exactly we will start to see big reductions again is unknown.
One ray of light for investors in the Irish property market is that due to the current uncertainty in the market, some people who had plans to buy this year, may perhaps delay by 12 months or more and continue renting in the meantime.
2022 & Beyond
How exactly the next few years will play out are anyone’s guess at this stage. But there are some trends emerging through all of this.
Short Term Letting
Massive profits have been made in the short-term letting market over the last few years. The likes of Airbnb and its friends have taken up a huge percentage of available properties, especially in city-center locations, in turn driving up rental prices.
Coronavirus has however put a quick end to the market for the foreseeable future but undoubtedly will remerge in the future.
In the meantime, landlords have been left with vacant properties and stacking service bills and maybe easily tempted back into the long term rental market. This for sure will increase the number of properties available which in turn will reduce rents. Particularly susceptible to this is the city centre market.
Government Intervention
During the lockdown, the Government has been busy. Around the country, County Councils and Property Management companies have been snapping up property in order to fulfill their social housing quotas. This increase in affordable social housing will inevitably reduce prices due to lower demand.
Work From Home Revolution
One of the more visible changes in our new world is the switch to ‘working from home’ – or ‘living at work’ as I’ve heard some describe it jokingly – will have unforeseen consequences on the rental market.
Companies may now find themselves with many empty offices/spaces and realise with the wealth of online tools available today, that they actually don’t need such large properties that can facilitate all staff, on-site, all of the time.
Many of these larger properties will likely be repurposed for accommodation which will, in turn, increase supply and reduce prices.
One note to take from all this however is, many who now only have to be on-site once or twice a week will be more willing to endure a longer commute. This will obviously have positive and negative effects on the market.
So what does it all mean?
The next 12-24 months will be turbulent no doubt, but the tried and tested rules still apply. Do your due diligence and diversify your portfolio in order to reduce risk. There will no doubt be many bargains on the market so keep your ear to the ground, but take into account what we have discussed here, and good luck.
Should you need any assistance, please don’t hesitate to contact us here at KPM Group. We would be happy to help in any way we can.
