A report published today says that rents have begun to increase for the first time in two years. In a review of the Irish property market, Bank of Ireland said a surge in employment had resulted for increased demand for accommodation.

The increase in employment and the growth in the number of people coming to work here is driving up the cost of rental accommodation. Rents have risen by 2% this year, reversing a decline in the past two years, according to Bank of Ireland.

Its economist Dan McLaughlin also says property prices will rise by 10% this year, a higher forecast than other commentators. He believes mortgage debt will reach €94 billion - up 26% on last year. Bank of Ireland says interest rates could rise by one percentage point over the next year. It says that may dampen demand for home loans but will not lead to a drop in house prices.

Dr McLaughlin said significant growth in household income and soaring immigration numbers now meant housing demand was running ahead of forecasts, and the 75,000 new homes expected to be built this year would not be enough.