The annual increase in rents reached 10.5 per cent in February in the fastest growth rate since property website Daft started monitoring rents.
The website says rental values have been increasing since the end of 2004, with the growth rate accelerating rapidly from the middle of 2006.
Rental properties in Dublin 2 saw the highest growth rates with average rent for a one-bedroom home increasing by 24.3 per cent to €1,234 per month.
Two bedroom properties in this part of the capital rose by 19.7 per cent to €1,679 per month. Two bedroom homes in Dublin 18 also saw a sharp rise in rents - which were up 18.8 per cent to €1,574 per month over the last year.
This part of Dublin includes Sandyford, Stepaside, Kilternan and Carrickmines, which are benefiting from being close good transport links.
According to Daft strong demand, rather than falls in supply, are behind the rise in rents. However, in some areas supply constraints are leading to rental inflation.
The report notes that one in every four houses is now bought by an investor, up from one in five just two years ago.
Outside Dublin, rental returns for accommodation are rising in Galway city and falling in Limerick city.
Daft claims that the growth in rental values is expected to continue throughout 2007.