A report by Davy economist Rossa White suggests that rising property prices are making it increasingly difficult for investors to use rental income to cover mortgage repayments. The report says the buy-to-let market is now afflicted by a 'boundless optimism'.
Mr White says house prices are rising at an annual rate of 15%, but rents have only recently recovered after a three-year period of decline.
He says rental yields - the proportion of the price of a property covered by annual rent - have dropped to 2% in many areas.
The economist looked at a number of properties in Dublin's inner suburbs, and concluded that in most cases, a buyer would have to put up at least 58% of the total value at the beginning in order to avoid losing money each month from rent. Rising interest rates would push the break-even point even lower, he said.
Mr White rejected claims that supply shortages were leading to rocketing prices in 'desirable areas', saying that if this were the case residential rates would also be rising rapidly. Private rents were up just 4% year-on-year in the latest quarter.
