Soaring rent prices are showing signs of slowing down for the first time in three years but remain at record high levels, according to a new housing report.

Housing experts said the rate of increases nationally is cooling, due to an improved supply of new homes and rent caps being introduced in areas of high demand.

Affordability has also been cited as a significant issue, with experts warning tenants may have reached a point where they will not be able to cover the cost of additional rent hikes.

Rent inflation fell from 12.4pc in mid-2018 to 9.8pc by year end, the slowest growth rate since 2016.

An analysis of the rental market by property website Daft.ie shows the average monthly rent nationwide at the end of last year was €1,347, an increase of €317 per month (31pc) compared with their Celtic Tiger high-water mark in 2008.

This represents a €600 per month (81pc) jump compared with when the market bottomed out in 2011.

Writing in today’s Sunday Independent, economist Ronan Lyons said Ireland was entering a critical three-month window which will demonstrate if the country has turned a corner towards real price recovery.

“We are still discussing substantial price increases, even if in percentage terms the increases in key markets have fallen below a noteworthy threshold,” he writes.

“One possible reason for the slowdown in inflation could be that the market has reached the limits of what tenants can pay.”

He suggests improved supply is also having an impact, with increased availability helping to stem price growth.

There were 3,641 properties available to rent at the start of 2019, an 11pc increase compared with last year. Supply in Dublin increased by 18pc in this period.

“This could indicate that the mild improvement in market conditions in Ireland’s rental market may continue,” writes Mr Lyons.

According to the most recent Census, 500,000 households are in rented accommodation – about one third of the country’s homes.

Housing charity Threshold yesterday said the “pace and extent of rent increases year-on-year remains unsustainable”.

Property consultant and market commentator Philip Farrell told the Sunday Independent the country has reached a point where tenants will not be able to cope with further hikes.

“The Rent Pressure Zones have had an effect on inflation because increases are restricted to 4pc. However, you are after seeing a period where rental figures have gone up by about 80pc in recent years. When you have a sustained period of increases like that, it has to level off at some point.

“It gets to a point where people simply cannot afford to pay any more. Rent prices are way out of kilter with mortgage values. If you were to buy certain properties the mortgage is likely to be less than the rent. That cannot be sustained.”

For example, the average cost of renting a three-bedroom house in Dublin 8 is €2,190. According to Daft.ie, monthly mortgage repayments for a similar property currently stand at €1,637 (with a 3.5pc variable rate for 30 years and 85pc loan-to-value ratio).

The number of properties available to rent nationally rose by 11pc last year, mainly in Dublin where demand is greatest. Mr Lyons said if this trend continued prices should drop further.

Read economist Ronan Lyons’s analysis of the rental market in today’s Sunday Independent

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