The chief executive of a €457 million property investment fund has questioned the current approach to planning in Dublin, suggesting density rules are inhibiting development as he forecasts rental growth of 10 per cent for 2015 and considers dedicated facilities for retirees looking to trade down at Rockbrook in Sandyford.
Speaking in Dublin at the agm of Irish Residential Properties Reit yesterday, chief executive officer David Ehrlich said that it's difficult to get the sums right on a development project when there is a limit on the number of units that can be built.
"We'd like to see a more flexible approach in terms of density and heights," he said, noting that the investment company would like to build 400-450 apartments on the Rockbrook site in Sandyford it acquired earlier this year. But Mr Erhlich said it was "frustrating" to hear talk about housing shortages when Ires Reit could get development "under way quickly because the infrastructure is in place" .
Tight supply
Planning however, is to an extent predicated on building larger apartments while the challenge for investors like Ires Reit is to “make the sums work”.
“To get capital you need a certain return,” he said, which translates to a requirement for a greater number of units. But the market may not just want larger, more expensive apartments.
"The quality of product [in Ireland] in comparison to rentals in North America is much higher, because they were built for re-sale," he said, adding that the market may need more of what people can afford.
"Not everyone can afford a Mercedes Benz, some people need a Nissan. "
Indeed of its 11 acquisitions, nine are characterised as “luxury”, with two (The Laurels, Tallaght, and Bakers Yard, Dublin 1) given a “mid-tier” classification. Now Mr Ehrlich said it wants to look more at the affordable and mid-tier market, adding that it is also open to engaging with the government in respect of affordable housing initiatives.
Against this background of tight supply, Ires Reit has perfomed strongly since its IPO in April 2014, and its Dublin apartment portfolio will come to about 1,566 once its closes its acquisition of Tyrone Court, in June. It is achieving occupancy rates of about 99.7 per cent and is benefiting from strong price increases. Indeed a two bed apartment in the Ires Reit-owned Marker Residence is renting for about €2,550 a month, or €975 for a two-bed in The Laurels in Tallaght.
Rent controls
And there is no slowdown on the imminent horizon. Mr Ehrlich said Ires Reit is forecasting rental growth of about 10 per cent this year, falling to about 3 per cent next year, and stabilising thereafter.
Of discussions to introduce some element of rent control in the over-heated Irish rental market, Mr Erhlich said that he wasn't concerned as Capreit has worked in such an environment in Canada, and that annual growth rates of 2.5-3 per cent would still be "very excellent growth".
However, he suggested that it would be “very, very hard” to bring in rent controls in the current environment where there was such an inbalance between supply and demand.
In addition to the traditional market for apartments, Mr Ehrlich is “beginning to see” more interest from retirees who are trading down to move into rented apartments.
