Shares in the State’s largest landlord, Ires Reit, slipped more than 7.3 per cent on Wednesday after Sinn Féin introduced a Bill providing for a three-year rent freeze across the private rental market.
Ires, which had 2,771 residential properties as of the end of June, with more in development, could suffer the most of the listed property entities given its exposure to the rental market.
As much as €70 million was cut from the company’s market value as its shares dipped to €1.686. The company’s market value at the market close on Wednesday was €879 million. This is, however, near its all-time high.
Goodbody analyst Colm Lauder said Sinn Féin's legislation would go further than European peers by introducing a State-wide freeze on rents for three years. This, he said, would hit the net asset value and "naturally the evaporation of the approximately 4 per cent forward rental growth assumption".
Speaking to The Irish Times, Mr Lauder noted that the primary driver of capital value growth across listed entities is expected to be on the rental side over the next three years. And if rents are flat across the private rented market, growth would be too, he said.
Sinn Féin's Bill, which proposes a three-year rent freeze in addition to examination of a refundable tax relief worth 8 per cent of annual rental costs for all tenants, is expected to pass the early legislative phase in the Dáil but is unlikely to get much further, particularly in light of the expected general election timeline. Fianna Fáil is supporting the Bill, at least until committee stage.
The Bill would expand upon the Government’s rent pressure zones introduced three years ago. These limited rent increases to a maximum of 4 per cent per year.
While Sinn Féin’s measures are unlikely to become law, industry sources suggested some players will now delay investment decisions until the new year until some clarity arises on the matter.
Mr Lauder noted that the likely impact of the Bill on residential investors is negative and would reduce incentives to introduce much needed supply. This, he added, will exacerbate the rental market’s supply shortage.