Lack of private rentals having an impact on economy of Cork

CORK’S dysfunctional housing and rental market is impacting on the city’s economy and stifling its growth, according to one of the city’s most well-known real estate agents.

Michael Powell of Powell Property, based at 48 Grand Parade, has told that the practice of large pension and investment funds block-buying houses and apartment blocks at exorbitant levels, thereby pricing local people out of the property market, isn’t yet a noted phenomenon in Cork, as it is in Dublin.

“Certainly they are looking at Cork at the moment,” says Mr Powell.

“Because there aren’t full schemes for sale, they seem to bundling them together — they might go in and buy 20 or 30 random apartments around the city and bundle them together into a fund.

“There’s no new private apartment block being built in the city because the costs are too strong.”

In Cork, the rent levels “aren’t strong enough”; a two-bed house to rent is around €2,200 but needs to be around €2,500 or €2,600 per month to make it viable to invest in.

“Cork is not at that. You can get over €3,000 in Dublin.”

COUNCIL LEASES

Mr Powell said the council was previously doing 25-year leases on properties but they stopped this last Christmas.

“Funds were very interested in that,” he says.

The funds would engage a third party developer to sell them the entire site, and enter into a 25-year lease with Cork City Council.

While this is now on hold, Mr Powell said he believes this directive could change again as there is a problem with supply and if supply is increased, the funds may move back in.

The price of steel is “out of control” due to international factors such as the war in Ukraine.

Powell Property has 700 or 800 rental properties that they manage on behalf of landlords and individuals.

“We’d like to see the market being stimulated. We’d like to see the introduction of tax breaks, like what they did back in 1994, when they gave allowances to investors to buy, and they could write off about 95% of the purchase price against the rental incomes,” says Mr Powell.

A new development in Cork has to be priced at about €450,000 for it to be viable.

“I can go on to Daft.ie and buy a second hand apartment in the city centre for €250k or €230k, so it’s not stacking.”

PROBLEMS FOR EMPLOYERS

“A huge problem here at the moment is the supply of accommodation for private people. Everyone is talking about social housing, which is a big demand, but I get phone calls every two days from employers saying they have offered a guy a job for fifty, sixty, seventy thousand, but he can’t accept the job because he can’t get the accommodation,” says Mr Powell.

He adds his company has 72 employees that he is trying to house in the next three months.

“I think I’ll struggle to house them. It’s very dysfunctional. I think they need all hands on deck.

“We would take on more projects ourselves, but at the moment they don’t make any sense,” he says. "This has been going on for two, three, or four years. There has been no private apartment block built in the city in the last 10 years.

“If you look around the city, there’s nothing for the private market. There are no private apartments being delivered. And there are a mountain of professionals looking for places.”

Plenty of existing apartments over retail units and offices could be delivered very quickly, Mr Powell believes.

“We did five units ourselves in the Grand Parade in a disused building. There’s a big opportunity there.”

The city council ran a “live in initiative” to encourage tenants to live over shop units in the city centre, with tax breaks, “but it’s not fit for purpose.

“They should be trying to get any available building — what can be converted into apartments.”

This could be incentivised with a grant scheme, adds Mr Powell.

A major issue is banks not providing competitive rates for development projects.

The minimum development finance rates are 8% to 10% so “it’s hard to make a margin and you’re constantly chasing the costs”.

Vat on new builds should be suspended for three years, he says.

“In the UK, there’s no Vat on new build houses. On a €100,000 build cost there’s €13,500 being returned to the government.”

Water infrastructure is a large cost he claims. Powell Property recently developed a pub into three apartments — Irish Water’s bill for three water connections and a sewer connection, even though they did no work to the sewer, was €18,000.

“That’s before stamp duty, legal fees, planning and professional fees, fire certs and planning contributions. The base costs to carry out the works are out of control.”