Dublin rents back above peak as housing shortage hurts economy

A man walks past real estate which has recently been sold in South Dublin August 28, 2013. REUTERS/Cathal McNaughton

DUBLIN (Reuters) - Residential rents in Dublin have risen above peaks hit during a property boom a decade ago amid a severe housing shortage that threatens Ireland’s attractiveness to multinational firms.

Rents in Dublin rose 0.4 percent above the high hit in 2007 in the final quarter of last year, data from the Private Residential Tenancies Board (PRTB) showed on Tuesday.

The cost and scarcity of accommodation, especially in cities, threatens to damage investment in Ireland, where mainly U.S. firms employ almost one in 10 people, and to wipe out the benefits of a booming economy for many workers.

Ireland was left with a surplus of houses after the 2008 crash but a decimated construction industry has since failed to build even half of the 25,000 homes analysts say are needed each year to meet demand.

The cost of buying a house remains over a third below the peak but rising rents mean many tenants struggle to save the big deposits needed under strict new central bank rules.

That in turn is hampering the mortgage market, which at just under 5 billion euros last year was half the size analysts would consider normal, and holding back the recovering but still mostly state-owned banking sector.

Rents in Dublin rose 9 percent in 2015 compared with a year before and increases outside the capital were higher still as the rest of the country catches up.

In a bid to dampen the market, a rare source of inflation in the economy, the government announced in November that landlords would be allowed to raise rents only once every two years.

The country’s largest commercial residential landlord, Irish Residential Properties REIT, said last month that the rules would only affect the timing of increases, however, and that rents would continue to grow strongly.

Reporting by Padraic Halpin; Editing by Catherine Evans