Thursday 22 March 2018

Ireland's biggest landlord: 'Dublin rents are at breaking point'

Tallaght Cross West is one of the rental complexes owned by IRES Reit. Inset: CEO David Ehrlich
Tallaght Cross West is one of the rental complexes owned by IRES Reit. Inset: CEO David Ehrlich
Peter Flanagan

Peter Flanagan

Apartment rents are reaching "the limits of sustainability" around Dublin, the biggest private landlord in the country has warned.

IRES Reit chief executive David Ehrlich told the Irish Independent that he had never seen a market like that in Ireland, which has had such an extreme imbalance between supply and demand.

It represents one of the starkest descriptions of the housing crisis by an industry figure to date.

IRES Reit controls 2,087 homes in the country, mostly around the capital.

The Dublin-listed firm is backed by Canada's CapReit, which owns nearly 50,000 apartments in that country.

Most IRES shareholders are overseas investment firms.

The average rent across the country is now above €1,000 per month and more than €1,460 in Dublin - with little sign of the market slowing.

Mr Ehrlich told the Irish Independent there was only one way to slow that rate.

"The solution is more supply," Mr Ehrlich said.

"We look forward to what proposals come from the new Housing Minister.

"We believe there will be a consultation process and we hope to be part of that," he added.

"We all know what happened before - construction essentially stopped and now we have this huge issue around supply," he said.

IRES has made huge gains in Ireland since it entered the market less than three years ago. In the year to the end of December, the company charged an average rent of €1,372 per month, up from €1,250 per month a year earlier - an increase of 9.1pc.

While those sorts of increases are good for landlords, Mr Ehrlich made clear that this was not ideal in the long term.

"Our investors want steady, consistent returns. A market showing increases such as these is fine, but we want consistency.

"We do not want peaks and troughs, we want sustainability, and the market is touching the limits of sustainability at present," he said.

One of the key factors in sustainability is the cost of new construction, with the building industry making it clear that costs and regulation need to come down.

"The apartments we own in Dublin are very different to what you see in the rental market around North America and Europe.

"If we wanted to build an apartment block in Canada, we would tend to build a large, rectangular building, which would have corridors not unlike a hotel.

"Depending on the size of the block we would have two or four lifts in one shaft. Here, with regulations around dual aspect, sizing and the ratio of lifts to apartments, that is not possible.

"Most apartments in Dublin were built to be sold. There aren't many properties that are specifically for renting, and there is a difference between a rental property and a property that will be sold.

"If you offered someone a dual-aspect apartment or a lower rent, the vast majority would take the lower rent," he said.

The previous government amended building regulations in Dublin to allow for smaller apartment sizes, but that has done little to kickstart construction so far. According to Department of Environment data, construction has started on only 181 homes since the start of this year.

IRES has spent hundreds of millions of euro buying apartments in Ireland, mostly by snapping up entire apartment developments from the banks and from Nama.

Last week it agreed to buy 203 apartments at Elm Park in south Dublin in a deal worth €59m. It is also building apartments in Sandyford.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business