A predicted rent rise of 2 per cent won't bother demanding young professionals, but will hit the working poor, writes Edel Morgan

EARLIER in the year we reported on "old block syndrome", a phenomenon afflicting young Irish professionals who are avoiding dated rental properties in favour of the shiny, new and fashionably-located.

Bank of Ireland's recent revelation that rents are set to rise by a further 2 per cent is unlikely to perturb those twenty and thirty-somethings with large disposable incomes. The average Dublin rent has already edged over the €1,200 mark after being under this level since late 2003.

For those at the lower end of the private rental sector, however, an increase will threaten affordability.

Money doesn't seem to be an issue for the upwardly mobile who are flocking to trendy waterfront developments, such as Gallery Quay and Hanover Quay in Dublin's south docklands, despite rents of around €1,500-€1,650 a month for a two-bed, €200 to €300 more than a two-bed apartment further along Dublin's quays. For them, appearances are all. They want a smart pad that screams success, so older blocks can be a turn-off.

An influx of immigrant workers, largely from China and the former eastern bloc countries, has boosted demand for rental property. Four-bed houses near the city centre have seen the biggest rise in recent months. Two-bed units, which account for over 40 per cent of the rental market, have risen by an average of €50 a month.

Pat Burke of Sherry FitzGerald Lettings says business is brisk in the city centre, where there is a dearth of good properties.

Smithfield is currently a rental hot spot with two-bed apartments at around €1,500 a month, a rise of around €200 on last year. "Smithfield has become the place to be. Some one-beds there are renting for as much as €1,200."

Dublin 2, 4 and 6 remain buoyant with D4 still the most expensive. A good one-bed apartment in the city centre is now around €1,000 a month, with two-beds at around €1,200-€1,400.

Kathrina Cahill of Home Locators says some parts of the suburbs are also doing well. "In Rockfield in Dundrum, for example, a two-bed is €1,295-€1,350 a month. This time last year it was €1,200 to €1,250."

She says the Luas has boosted activity in Dundrum, Milltown and Sandyford. BL (before Luas) a two-bed unit at Carmanhall in Sandyford was €1,150-€1,200 a month. It is now €1,350. Other areas have fared less well. Dalkey has seen a 4 per cent drop and the west side of city has been a casualty of volume building with the largest drop in rental income in the city.

On the northside, demand is strong for properties in Clontarf and Howth, where rents have increased by over 13 per cent. The IFSC, Fairview and Glasnevin areas are also doing well.

To let a property within two weeks and achieve a top rent, a property must be in good condition, says Cahill. "Tenants like good standard modern apartments. In the case of older blocks, I'd advise investors that, if they don't update their properties, they will be slow to rent."

Rental agents say the corporate market has seen a slight uplift but is still relatively sluggish. Anecdotal evidence would suggest the level of enquiries for luxury properties in Dublin 2, 4 and 6 has increased, with turnaround time for properties reduced. The owner of a luxury two-bed apartment in Dublin 6 told Property it took him two months to let the property last year and the executive tenant he eventually found insisted the furniture was replaced because it was too dark.

This year he let the property within six days for a higher rent and the only stipulation from the tenants was that the contract included a six-month break clause. Three and four-bed family houses are in short supply in the €1,500-€5,000 price bracket, particularly on the south side of the city.

"There is a lack of quality," says Pat Burke. "They are particularly in demand by people who can't get a foot on the ladder but are settling down and need a bigger house."

Cahill says that while one-beds have always been in strong demand, two-bed properties have seen an uplift since 2004. The bulk of tenants are signing one-year leases, with some insisting on six-month break clauses. While the short-term rental market is alive and kicking in the docklands, many investors are steering clear of it because it is too time consuming. While rents are rising, yields are still unattractive for investors.

Average rents in Cork and Galway are 20-30 per cent lower than in Dublin. The Cork market is slightly more buoyant with properties taking an average of 12 days to let, versus nearly two weeks in Galway.

The predicted rent increases will put the working poor and those at the lower end of private rented sector under further financial pressure, says Bob Jordan of Threshold. The working poor are those earning a minimum wage, such as shop workers, restaurant staff and fast food outlet workers, who often toil for more than 30 hours a week.

"The average bedsit costs €150 a week. If you have someone earning €270-280 a week, they are left with only €120 after they've paid their rent. If rent starts to increase, they are running into affordability problems. We are calling on the Government to increase tax relief across the board to help people at the bottom end of the market."

He says that those on the social welfare single supplement allowance of €120 also fall short of weekly rent for a bedsit.

"Around 28 per cent of those on housing waiting lists are there because they can't afford their existing accommodation. An ESRI study found that a lot of the poorest people are in the private rented sector.