A new report from Savills shows that the private rented household sector is growing “explosively” in Dublin. Just short of 25% of all households in Dublin – incorporating 328,700 persons – are now living in private rented accommodation. This represents a 61.3% increase since January 2011. The stock of housing units in the sector has expanded by 43,120 in Dublin since then, and by 24,128 nationally.

At the same time, vacancy rates in the sector in Dublin have fallen close to zero early in 2016, after peaking at over 10% in mid-2009 as the recession took hold, says the comprehensive report.

Savills also calculated present and historical vacancy rates for the first time, using accumulated CSO data. From mid-2009, vacancy rates began to fall, but faster net absorption caused this to happen more quickly in Dublin. By Q1 2014, the surplus of vacant rental properties in Dublin had effectively run out and the vacancy rate has remained below 2% since, and is now just 1.45%.

Using the data, the estate company has modelled rent growth and predicts that average annual growth in rents the sector from now until the end of 2018 will be 8.6%, for a total of 23.8% in the period. The company says rents in the capital will not stabilise until the stock of rental accommodation has increased by 300%.

It’s a picture entirely different to that presented by some commentators, who claim landlords are fleeing the market and the sector is contracting. Savills director of research Dr John McCartney said: “With rents back to boom-time levels, income yields on residential property are much more attractive than the returns available to investors who leave their money in the bank or buy a bond. On top of this, investors are generating wealth from capital appreciation – it’s a no-brainer for people with the cash.”

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But, while the stock of rental properties in Dublin has risen by 54% since early 2011, this has not been sufficient to keep pace with the growth in demand.

McCartney added: “House price inflation, sluggish wage growth, weakened household balance sheets and tight mortgage lending have conspired to drive people who would otherwise have been owner-occupiers into the rented market. At the same time social housing tenants are increasingly being housed in private rented accommodation. This has driven a huge increase in rental demand.”

Block sales of residential units are decreasing as supply declines, but small investors are an important component of the sector and continue to be active, while larger investors are turning to the build-to-rent model and away from buy-to-rent.