House rents 'set to rise'

The cost of renting is due to rise this year for the first time since 2003, it was claimed today.

A Bank of Ireland review of the property market today said a surge in employment and immigration has resulted in an increased demand for accommodation.

This year is expected to show the strongest growth in the labour market since 2000 as 93,000 jobs were created in the 12 months up to June.

Bank of Ireland chief economist Dan McLoughlin also said property prices will rise by 10% this year and mortgage debt will reach €94bn, up 26% on last year.

Mr McLaughlin also predicted interest rates could increase by 1% over the next year, which he believes may dampen demand for home loans but will not lead to a drop in house prices.

“In the last couple of years, rents were falling nationally but they turned up in recent months,” he said.

“Employment increased by 93,000 in the 12 months up to June and wages are rising by 5%.

“There’s a significant increase in people’s housing incomes and that’s driving housing demand.

“The average net immigration between 2001 and 2004 was 34,000 a year but that rose to 53,000 last year.”

However, Bank of Ireland expects the 150,000 houses built in the last two years to put downward pressure on rent prices.

“The problem with housing is it’s an investment for some people but 80% of houses in Ireland are owner-occupied and will be lived in for 20 or 30 years,” he told RTÉ Radio.

“The average mortgage rate in early 1980s was 15% compared to 3.5% now. Debt has gone up but the payment burden is lower than it was then.”