Dublin cheap in European rental league although costs still spiralling up

A one-bedroom apartment in the new Custom House Square development renting at £700 per month was snapped up on its first viewing. Two-bedroom apartments in the same development that were advertised for £850 per month in February are now going at £900.

Rents for city centre apartments have increased by 40 per cent in two years and show no sign of stabilising. Is the Dublin residential lettings market spiralling out of control?

Unfortunately for all those crying foul, the answer is no. Rising property values, low interest rates and high demand for rented accommodation from young people priced out of the first-time buyers market have resulted in a very buoyant lettings market.

However, according to the Lifestyles Survey 1999 compiled by international property consultants, Knight Frank, Dublin rents would still be considered cheap by capital city standards.

London remains the most expensive European city, and the third most expensive international city, in which to rent accommodation. Paris is the second most expensive city in Europe, with Warsaw, Milan and Prague all high on the list. Dublin falls into the middle category, along with Rome, Frankfurt, Berlin and Edinburgh. Brussels, Madrid and Barcelona are all considered good value for money.

In comparison to other European countries, the average monthly rent for Dublin property is not that high - but Dublin falls behind when you measure the cost of rent in relation to wages. Irish tenants pay a higher percentage of their monthly income on rent than tenants in other countries. And sharp rent increases are unheard of in the European model, where increases are index linked and average about one to three per cent per year.

Long-term leases, unfurnished apartments and legislated tenants' rights are standard on the continent's static property market.

Ireland has traditionally had one of the highest levels of home ownership in Europe, with the majority of people buying their first home in their mid-twenties. Lower levels of home ownership in countries like Germany, Spain, France and Italy mean that there is a much more developed and secure lettings market. The average age of first-time buyers in Germany is 35 to 40 years old and according to Justin Gayes of Knight Frank in Munich, "renting property is cheaper than buying in Germany".

London is still the most expensive place to rent property. In 1999, rents dropped 10 to 15 per cent, which was a reflection of the overall market performance and the successful buy-to-let scheme which encouraged many small investors to buy residential property to rent out. But already this year, rents have increased by five per cent.

Rupert Smith of Townends estate agents says: "Depending on location, an average one-bedroom apartment rents for £1,000 to £1,200 per week, and a two-bedroom place is £1,300 to £1,600. Those prices will vary depending on the building, the features and the facilities that are there. The rental market slowed down last year, but it is recovering once again, and prices have stabilised. Rent increases are index linked, ranging from three to five per cent per lease term. "

In Paris you pay for location. The 16th and 17th arrondissements are the most sought after addresses, and the 6th and 7th quartiers are also popular locations. According to Susan Zeitonni from Cosmopolitan Services International, a one-bedroom apartment in the popular 16th arrondissement is priced from £700 to £1,500 depending on size, features, quality and building charges. Unfurnished apartments usually let from approximately £14 per sq m, which is more expensive than in Germany. Two-bedroom apartments in the 15th and 16th district let from £1,500 up to £2,500, depending on individual qualities. Building charges in many continental cities usually include heat and hot water.

The French residential lettings market is controlled by legislation and landlords letting unfurnished apartments have to sign a three or six-year lease. "Young single people usually rent studio apartments, which are quite small in size, with just one room. These studio rooms are cheap and prices usually start from £300 upwards per month, depending on location," says Zeitonni. The Paris property market continues to experience buoyant conditions, with prices increasing as demand levels remain strong. Rent increases are index linked, ranging from half a per cent to two per cent.

City centre apartments in Rome are expensive. It is quite a pressured market, and although the standard is quite high the space is modest. A balcony or terrace is a requirement, and heating and hot water are usually included in the rent. Prices are lower than in Paris, with a one-bedroom furnished apartment in the Vatican area renting for £800 per month. City two-beds rent for around £1,000-plus. But a four-bedroom, three-bathroom furnished villa on the outskirts of Rome rents from £900 per month.

The Germans have their own standard system for calculating rent by the sq m. Properties are unfurnished and tenants bring everything, from the kitchen sink to the light fittings. Frankfurt, Berlin, Hamburg and Cologne all average about 25 DM per sq m - which is about £10. Munich is more expensive, averaging at 30 DM - or £12 - per square m.

"Rents do not rise in Germany. People sign long-term leases, anything from three to 10 years, and any projected rent increases have to be written into the lease. House price inflation is almost stagnant. Increases in rent would only be the result of inflation, and would be very small, and would have to be written into the contracts," according to Justin Gayes of Knight Frank in Munich.

Renting an apartment in Germany, where only one-third of the population are homeowners, is cheaper than buying property. The average monthly rent is half of what it is here in Ireland. Berlin has a large supply of cheap properties, mainly in the eastern districts and a large four or five room apartment rents from £600 per month.

A dual rental market exists in Prague, with rents ranging from £80 to £4,000 per month. Local estate agent Ed Hughes says: "Expats living and working in the former Soviet satellite state pay top market prices, while the majority of Czechs live in rent-controlled accommodation. Rent is not considered expensive here in Prague, and most of the city centre property is in historic buildings." Following the collapse of the communist regime, the Czech government repossessed many of the old buildings that the Communists had seized and returned them to the original owners, giving lease and rent guarantees to existing tenants.

"The top-of-the-market apartments that rent for £4000 are very exclusive, but there are a lot of expats living there who can afford to pay the premium rents. The rental market is changing very fast at present," says Hughes.

Madrid is considered a cheap city in which to rent property, even in the hotspot Jeronimos and Salamanca districts. Prices start from £150 per month, and a three-bedroom apartment in the city centre lets from £500 per month. For £900 a month, the cost of renting a two-bedroom apartment in Dublin's Custom House Square, you can get a five-bedroom 220 sq m apartment in a complex with swimming-pool, tennis courts and private parking, judging by advertisements in El Pais, the main Spanish daily newspaper.

Prices in Barcelona are similar. The standard sizes of apartments are larger, as the majority of Spanish city dwellers live in apartments, and there is a greater stock available. Newer apartment blocks yield higher rents then older buildings, but essentially you can rent a one-bedroom apartment in the city from £150 per month.