2008Review: RENTAL MARKET:Rents are falling and the number of rental properties is rising, so tenants rule the roost, writes   Edel Morgan

There was a return of tenant power in 2008. They're a force to be reckoned with and they are out in the marketplace, negotiating with landlords and driving hard bargains.

After viewing a string of properties, young professional Sarah Plunkett has found her ideal place - a spacious studio apartment in a period house in Rathmines for €800 a month including bills.

On her flathunt she discovered that rents differ wildly with some landlords looking for "atrociously high" rents and others far more realistic. She says getting the best deal "is all about having the confidence and the experience to negotiate with a landlord".

Plunkett says it's a very different marketplace to the one she came back to from London three-and-a-half years ago. Her first rental back then was a two-bed in Rathfarnham for €1,400 a month in a scheme where rents are now €1,000.

She then took a room in a house for a year for €750 a month. This time around she wanted a place to herself and, with a budget of €800, was in a strong position to get it. She viewed quite a few places through Daft but says "the pictures can be misleading".

She found her studio flat in Rathmines through Home Locators after the rent had been reduced to €800 from €1,100 a month. "The presentation was great, the outside and halls are cleaned every day and the landlady was very nice and accommodating. These are the things that make all the difference." While she says €800 isn't cheap she has no travel expenses as she walks to her job in Urban Outfitters in Temple Bar every day.

She has been under massive pressure to buy rather then rent from family members but says she is too afraid. "You just don't know what way it will go and it's nice having no ties to a mortgage. People say it's dead money but I like the freedom."

The market is being buoyed up by young professionals, like Plunkett, who are opting to rent rather than buy because of the uncertainty in the market and the prospect of further rent drops next year. While tenants are in a much stronger position than they were a year ago, for landlords it's a "tough" market, says letting agent Niall Clarke from Douglas Newman Good who adds that expectations among tenants have soared. "The market is oversupplied with property, rents are dropping and tenants are negotiating for more. Property is still letting but it is more difficult to let."

This is in sharp contrast to the second half of last year when rents were rising at double-digit rates as potential first-time buyers postponed buying as they saw house prices falling. He has noticed a significant drop in the number of immigrants looking to rent. "In our west Dublin office eastern Europeans accounted for around 80 per cent of lettings, now they are 20 to 30 per cent."

Friends First estimates that 30,000 immigrants have already left the country with a further 35,000 to follow next year, which is sobering news for landlords around the country.

The ESRI predicts the number of people leaving Ireland next year will outstrip those moving to the country for the first time in 14 years. It says the biggest exodus will be among the 170,000 workers who arrived in the past four years from Poland and other east European states.

With the residential sales market in serious decline, the rental market has been the saviour of many estate agents who have switched over to lettings to bring in fees. But as 2008 progressed it became harder to make a living out of it, with a huge supply of second-hand and new property unleashed onto the market, outstripping demand.

Rents hit their lowest level since August 2006 and Daft estimated that by November 18,000 properties were available to rent nationwide, an increase of 133 per cent on the same period last year. The market was flooded by new and second-hand properties that wouldn't sell which put a downward pressure on rents.

At the top end of the market demand for corporate-style rental property has slowed greatly as the onset of recession has meant that many companies are no longer bringing staff here from abroad. Kathrina Cahill from Home Locators says that September and October were traditionally busy months with families relocating to Ireland. "They would have taken houses in the €4,000 to €6,000-a-month range but they are not coming in."

Rents in this sector have been on a particularly swift descent with reductions of €2,000 a month not unusual, meaning there is good value to be found in these large luxurious homes for anyone still looking for them.

Cahill has seen properties that would previously have commanded €6,000 a month drop to €5,000 "and still no takers". Even at €4,000 a month they are slow to let - even to Irish families who've sold their property and are renting until the market picks up. "They have money in the bank they're getting interest on. The maximum they are going to pay is €3,000 to €3,500 a month."

At the other end of the market well priced affordable properties are still letting well leaving some developments once coveted by tenants behind, unless the price is right. In the Sweepstakes in Ballsbridge, for example, Douglas Newman Good had a two-bed on its books that failed to let at €1,495 a month, but has been taken at a lower rent of €1,100. However, a two-bed on the less salubrious Cork Street, but convenient to town and on the Luas, recently let quite quickly for €1,150 a month.

Eileen Sheehy from Sherry FitzGerald Lettings cites Foxrock as an example of an area that is losing out to a better located area with more choice nearby. "Family houses and apartments there are hard to move. There is an awful lot of stuff along the M50 close to Carrickmines which is close to Foxrock but rents differ."

Older property is struggling in some areas as tenants opt for the newer-builds that developers can't sell. Clarke says Donnybrook is an another example of an area that's struggling, where there are currently 298 properties to let "but the demand is for 40 or 50".

He has noticed the rise of the reluctant landlord who is only doing it because they can't sell and who can be unrealistic in their expectations. "I had a client who didn't want three professional men in their late 20s rent his place because he had a preconception they would be having parties. I rang him three times telling him he was making a mistake." Another landlord held on to his principles for five months before agreeing to take a more flexible approach. "I estimate he lost €20,000 in that period."

Families who have sold their home and are renting until the market picks up have emerged as a substantial group and are also looking to get the best value for their money. Clarke says there is often a gap between the type of property they're prepared to rent and the ones they might consider buying. "For a rental they want a modern manageable house in a good area, particularly if they have children," he says.

There have been substantial rent drops around the city and Eileen Sheehy says that, while the average two-bed in Stillorgan was €1,800 a month a year ago, it is now down to €1,400 a month. One-beds in the area are down to €1,000 from €1,300 a month. She says the average Bray two-bed was €1,300 a month a year ago, now it's €1,050 a month.

While the days of waiting lists in the docklands are over - when young professionals jostled to get into the hippest locations - she says the city centre is still faring quite well. Apartments in Longboat Quay, Gallery Quay and Spencer Dock in Dublin's docklands are still in demand where one-beds are €1,300-€1,400 a month and two-beds are €1,600-€2,000 a month depending on spec and their location within a building.

It appears likely that the current rental situation will last until at least 2010 - until some of the overflow of property is sold off and the number of new units being built diminishes further.

Daft predict that, if the number of new homes being built drops to the estimated 55,000 over 2009 and 2010, this should eventually bring the market back into balance. Until then tenants rule OK.

Average rents around the country

West Dublin:one-bed - €990 a month; two bed - €1,170 a month

North Dublin:one-bed - €998 a month; two-bed - €1,150 a month

South Dublin:one-bed - €1,145 a month; two-bed - €1,490 a month

Dublin 1:one-bed - €1,100 a month; two-bed - €1,450 a month

Dublin 2:one-bed - €1,200 a month; two-bed - €1,660 a month

Galway:one-bed - €660 a month; two-bed - €940 per month

Limerick:one-bed - €580 a month; two-bed - €780 a month

Cork:one-bed - €795 a month; two-bed - €985 a month

Waterford:one-bed €610 a month; two-bed - €720 a month