Rents have increased by nearly 12% over the last year according to a study carried out by one of Irelands busiest property websites Daft.ie.
With an increase of 11.9% rent inflation is now at its highest level since the Daft Report was started in 2002. The average rent nationwide now stands at €1,382, approximately €150 more than this time last year.
Over the last year, the supply of properties available for renting has fallen by about 20%.
The fall in supply may represent some investors selling their properties and leaving the Irish rental market.
On top of this, many people who have been priced out of the residential sales market are staying in their present rented accommodation.
This is affecting supply, as it reduces the number of properties becoming available for rent. At the same time, demand is at an all-time high due to the 'demographic bulge of people at renting age and high levels of immigration'.
In Dublin, rents are up by 12% on average. Areas closest to the city centre have seen greater increases in rents than more outlying suburbs. Rents in Dublin 1 and Dublin 2 have increased by up to 20% in the past year.
This compares with growth of less than 10% in areas such as Dublin 24 and North County Dublin. The largest increases in rents have been for four and five-bedroom properties in South Dublin, where rents have increased by up to 50% in the last year.
Rents in Cork and Limerick cities have performed stronger than Dublin, increasing by around 14% over the past year.
Growth has been somewhat slower in Galway and Waterford cities, where rents have typically risen by about 6.5%. In the Dublin commuter counties (Louth, Meath, Kildare and Wicklow), average rents are up 7.4%, while in South-East Leinster (Kilkenny, Wexford and Carlow), rents have increased 6.5%.
Although rents are increasing nationally, in certain market segments, rents are close to static. Outside the major urban areas, rents have increased by no more than 3% on average during the past year.
Director of Daft.ie, Brian Fallon said: "With many people no longer able to afford to buy their own place, people are now extending their leases and staying in rented accommodation.
"As a result, rents are being forced upwards as there is more competition for fewer places to rent.”
CEO of the Institute of Professional Auctioneers and Valuers (IPAV) Fintan McNamara contrasted the current climate in the rental market with the period between 2001 and 2004, when rents fell by up to 20%.
“Falls at the time were due to the increase in supply of rented accommodation following the introduction of various section-type reliefs such as the expansion of Section 50 relief for student accommodation and the introduction of the Rent-a-Room scheme, as well as the prevailing low interest rates,” Mr McNamara commented.
“The surge in rents in the last two and half years is in no small way due to strong demand arising from significantly increased immigration following EU expansion. Furthermore, the eight increases in interest rates since December 2005 have undoubtedly contributed to higher rents.”