The residential property market in Ireland continues to attract investors due to strong growth witnessed in recent years, particularly as the lack of housing stock available is contributing to rising rents.

Savills report that spiking rents are attracting a growing number of investors into the Irish property market, particularly in Dublin, which may become increasingly like London with “expensive properties”, many of which are “owned by investors”

A surge in interest from investors helped to push Irish property prices up by 7.1% in the year to April 2016, according to the Central Statistics Office (CSO).

Prices increased by 0.3% in April, led by a 1.6% month-on-month gain in Dublin taking the annual rate of growth in the capital to 4.6%.

House price growth in Dublin is starting to pick up again following a slowdown after restrictions on mortgage lending were introduced by the Central Bank last year. The drop in house buying activity has led to a shift towards renting, forcing up rental values; an attractive proposition for buy-to-let investors.

“Price growth slowed in Dublin last year as tighter mortgage lending forced people into renting,” said Dr John McCartney, director of research at estate agents Savills Ireland. “However, this slowdown was always going to be temporary; the shift to renting has forced up rents, attracting investors who are now scrapping to buy properties and driving up prices.”

Residential property prices across Ireland remain on average 33% below their 2007 peak, but the signs are that values will continue to grow in the near term, especially in Dublin where demand is significantly outstripping supply.

The rate of house price growth in Dublin was always likely to slow sharply last year after restrictions on mortgage lending was introduced by the Central Bank, but McCartney fully expects the slowdown to be short-lived.

He added: “The Dublin market may become increasingly like London with expensive properties, many of which are owned by investors.”

Davy economist David McNamara projects that house price inflation in Ireland “will settle at 5% by year-end”.