Average rents in Ireland have increased by more than 82% over the past 12 years, compared to the EU average of 18%, according to figures published by the Banking and Payments Federation of Ireland.
In its latest Housing Market Monitor for the third quarter of this year, the BPFI said the population is growing much faster than we are building homes to house people.
The population increased by over half a million people between 2011 and 2022, while housing output grew by only 130,000 units.
The BPFI also said that while there was a significant increase in new housing to the market in 2022, we are now seeing a decline in the figures for the commencement of new builds.
It noted that commencement figures of new housing in the first nine months of 2022 were 5.4% higher than in the same period of 2019.
But that activity seems to be declining on an annual rolling basis after peaking at 35,000 units during the first quarter of 2022 to about 26,600 units in October.
BPFI Chief Executive Brian Hayes said the significant gap which now exists between average rents and mortgage payments, coupled with significant latent demand, are likely to balance any negative impact on demand for mortgage lending in the short term which will likely continue to impact house prices unless we see a substantial increase in supply.
He noted that the average first-time buyer monthly mortgage payment was just over €1,000 during the first half of 2021 compared with the average monthly rent of over €1,400 at the national level, with the gap being significantly higher in Dublin.
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"While in the short-term mortgage demand may be impacted by the cost-of-living crisis and general economic uncertainly, this may well be offset by factors such as pent-up demand and high rental costs which will sustain home buying demand into the future resulting in price pressures, albeit at a lower level, unless supply increases substantially," Mr Hayes added.
Speaking on RTÉ's Morning Ireland, Mr Hayes said there is "massive saving" happening in the economy and one of the reasons why house price inflation grew so significantly after Covid was because of the pent-up level of deposits that were there, "they were adding and fuelling house price inflation".
He said the average rent price is around €1,400 whereas the average mortgage is about €1,000 nationally.
"Of course it's different in different cities, Dublin and the like. We think it is a much better proposition for people to be able to own their own home but the problem is we have too many people chasing too few homes."
He added that unless the focus is kept on increasing supply levels, we are not going to achieve moderation in house price inflation.
