Rents could rise by a further 25% in the next two years according to Savills...
Minister for Housing, Planning and Community Simon Coveney yesterday launched a review of the residential rental sector. This is in the wake of the Savills report which said rents could rise by 25% in the next two years.
Fintan McNamara, Director and spokesperson for the Residential Landlords Association of Ireland joined Newstalk - he does not believe that rents will rise at the speed that Savills has predicted:
"I don’t expect rents will go up 25% in the next two years or so," he told Newstalk Breakfast's Colette Fitzpatrick.
"Rent has come (up) again - they needed to come back because landlords are very heavily taxed and they need the money to meet their overheads," Mr McNamara continued.
After a crash in rents during the recession, Mr McNamara says that we are seeing a market correction, and that tenants are less likely to move, as they keep properties which still have monthly rents which are below the current market value:
"Very few people are leaving - they're staying in existing accommodation because they are not affected by the full market forces."
He refuted the accusation that landlords in Ireland are using the nation's housing shortage as an opportunity to maximise their profits by hiking up rents - adding that some landlords are "being instructed by their lending institutions to increase their rents so that they can meet their financial obligations."
The representative told Newstalk that some 60% of property owners' gross rental income goes to the State, while another 15% is used to cover the operating costs of keeping tenants.
The director believes that regulations not allowing bed sets and other forms of 'budget accommodation' to be rented out are keeping a few thousand "three and four star" dwellings off the market and that these rules should be altered to increase supply.
Up and up
This week's Savills report into the sector predicts that costs could climb between 22-26% over the next two years.
The prediction comes as renting in Dublin continues to grow rapidly. The real estate agents found that there has been a 61% increase in the number of households renting in the capital over the past five years – the roughly 328,000 people renting there now comprise 25% of Dublin's total housing market.
Despite the perception that there's been no increase in supply over that period, the stock of housing units in the rental market has actually increased by about 43,000, with landlords attracted by the returns on offer. However, this number has been insufficient to deal with demand.
Dr John McCartney, Savills' Director of Research and the author of this new study, puts growing demand down to a number of things:
"Dublin's population is now growing by about 1.7% per annum so this is the second fastest rate of population growth we've ever really experienced in the city.
"In the last 12 months, we've had 17,600 new households forming in Dublin and we've only built 3,500 residential units to put them in. So that's a fundamental problem."