Rents in Dublin City soared by more than 11% last year and average rents across the country climbed by 7% in the same period, according to a new report.
The average advertised rent nationally is now €865, while in Dublin it is €1,210 — up 11.2% year on year.
The quarterly Daft.ie rental report covering the last three months of 2013 signalled a warning that such increases in rent levels could adversely affect the country’s competitiveness.
Such was the increase in rental rates in Dublin that it is the fastest rate of inflation in the rental sector since the middle of 2007.
Rents are still 15% below the peak of the Celtic Tiger period in mid-2007, while around the country rental rates now are still more than 20% below those of mid-2007.
However, the rapid increase in rents in Dublin has sparked fears that it could have a negative economic impact.
The author of the report, Trinity College Dublin economist Ronan Lyons, said: “Ireland’s competitiveness depends on cheap accommodation — both for sale and to rent — so double-digit inflation in rents concerns everyone.”
He said the growth in rental rates was city-led and a direct result of people living in places that offered more job opportunities.
However, he said there was a question mark over whether supply was meeting demand in a marketplace in which one in three people are now renting.
“The young make up the bulk of renters and where they choose to live is driven by one factor above all others: The availability of jobs,” said Mr Lyons.
“As is the case with all other developed countries, Ireland’s rural areas simply cannot create jobs as well as Ireland’s cities so, for those who choose to stay in Ireland as they enter the labour force, it is the cities where they look for a place to call home.
“The clear signals the market is sending out about a surplus of demand over supply, in Dublin in particular, raise questions about Ireland’s construction sector.”
He said that from January 2011 to December 2013, work began on constructing just 2,000 new properties.
“Until construction restarts in Dublin in a meaningful way, it is quite likely that we will see rents continue to rise in many parts of the city, while the next generation of tenants is pushed further out from the city and their jobs,” said Mr Lyons.
The Daft.ie quarterly report shows that people seeking rental properties today have a much smaller supply to choose from, with rents rising rapidly in many areas.
While the rental rate in South Dublin City rose by 12.1% year on year, in rural areas such as Donegal, Mayo, Roscommon, and Limerick county, rates either remained static or fell.
In Cork City, average rents rose by 4.1% year on year to an average monthly cost of €831. The average rent in Galway city is €814, while in Limerick City, it is €661 and €594 in Waterford — one of the few urban areas where rents actually fell, in this case by 0.6%.
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