Growing demand allied to a shrinking supply of housing stock are the main driving forces behind a near 20 per cent increase in rents in both Limerick and Waterford over the past year, according to auctioneers involved in the rental market in both cities.
They were responding to a recent survey which showed rents rose nationally by an average of 11.3 per cent for the year September 2017 to September 2018 to reach a new average high of €1,134 per month – some €304 more expensive than during the Celtic Tiger peak of 2008.
But while the survey, from the property website daft.ie, showed the year on year rise for Dublin works out at 10.9 per cent and for areas outside the five main cities works out at 10.6 per cent, the most striking feature was the dramatic increase in rents in Limerick and Waterford which saw rents rise 20.3 per cent and 19.7 per cent respectively over the past 12 months
According to Limerick auctioneer, Kersten Mehl who has been involved in the rental market in the city for some 40 years and Waterford auctioneer, Gregory Fitzgerald who has been involved in the rental market on Suirside for almost 20 years, local factors have been hugely influential in the rise.
Mr Mehl told The Irish Times that there seemed to be a perception among the public, politicians and some media commentators that "landlords are simply creaming it" but the reality was very different, most certainly in Limerick where many landlords are exiting the rental market.
He explained that he hadn't seen such a shortage in rental stock locally since the late 1970s when Aughinish Alumina and Irish Cement were setting up their operations in Limerick and people had to rent properties as far away as Ballybunion in Co Kerry and Ennis in Co Clare.
The 1980s had seen an expansion in housing in Limerick city and suburbs which resulted in an excess of supply over demand which carried through into the Celtic Tiger years but in the past two years to 18 months, that situation has changed, resulting in greater demand and rising rents.
While several major developments are at the planning stage in Limerick, none are nearing completion which allied to the numbers of landlords exiting the market is resulting in “a grossly dysfunctional housing market”.
“I’ve 925 properties on my books and if you look at our website, I would reckon I would have no more than three or four for rental and while there are other operators in Limerick, you would have no one as big as us – I reckon you would have 50 properties max for rental in Limerick at the moment.
“In Dublin, there are a lot of new properties coming on the market but not here in Limerick - there are no big investors coming in here and landlords are taking such a kicking from government that many are exiting the market - I’ve lost 120 properties since 2017 alone.”
Mr Mehl instanced the case of one client, living in England, who decided after his last tenant moved out not to put the property back on the market as he felt it was just not worth his while given the minimum housing standards requirement and the fact that he would pay 50 per cent of his rental income in tax.
In Waterford, Gregory Fitzgerald said a similar situation existed, with just one major housing development planned for the city at the moment, resulting in a shortage of housing stock. And there is another issue causing a fall in the number of rental properties, he said.
“At least once a month, I get a call from a client who has been done a deal with the bank – they’ve been in negative equity but the bank will take back the house and cancel the debt and they are happy with that, no more torment or worry, but that house is not coming back into the rental market so it’s lost.”
Mr Fitzgerald said that it’s only in the last 12 months that rental income has started to rise in Waterford and while the current daft.ie figure for average rent for the city is €955 per month, up until two years, ago, a landlord could only ask €650 for a standard three bedroom semi-detached house.
According to Mr Mehl, the situation is similar in Limerick with a standard semi-detached house yielding €850-€900 a month in income up until two years ago whereas now according to daft.ie, the average rent for a property in Limerick is €1,131 a month, reflecting the growing demand in a tightening market.