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'Generation rent' bears brunt of rising inflation as prices leap 4pc in one year

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Property search: Rents and mortgages are higher. Stock picture

Property search: Rents and mortgages are higher. Stock picture

Property search: Rents and mortgages are higher. Stock picture

The cost of accommodation in the private rented sector rose almost 4pc in January from a year ago, heaping more misery on a generation priced out of owning a house.

The situation wasn't much better for those who do actually own their houses, according to data from the Central Statistics Office, which shows that mortgage costs rose by 2.9pc in the year.

Once accommodation was paid for, then rising heating and maintenance costs also made inroads in consumers' pay cheques. Both were up 3.1pc from January 2019.

The CSO said the main contributor to an overall reading of a 1.3pc rise in the consumer price index in January from a year earlier was "due to higher rents and mortgage interest repayments in addition to an increase in the cost of home heating oil and electricity".

That is a blow to consumer finances here, even with rising pay.

This country has experienced the largest rise in house prices since the end of 2015, according to a report this week from the Bank for International settlements, and is the second most unaffordable relative to incomes after Switzerland.

While there are record numbers of people in work and wages rose by an annual 3.4pc in the third quarter of last year, the latest period for which data is available, the rising cost of accommodation is creating a big hole.

The cost and availability of accommodation emerged as one of main factors behind a surprise surge in support for Sinn Féin in the General Election.

In its manifesto, Sinn Féin pledged to implement a three-year refundable tax credit worth up to €1,500 a year for all existing and new tenancies as well as to impose a three-year rent freeze after which rent reviews will be linked to the Consumer Price Index.

It has also said it would give the Central Bank Ireland powers to cap mortgage interest rates for home owners.

Rent controls have had a mixed press and many economists say they will exacerbate housing shortages.

Their introduction in Berlin has worked to reduce some rents but has had the effect of pushing prices higher in sectors that are not regulated.

Overall consumer price inflation hit 1.3pc in December which was the highest reading since April 2019 at 1.7pc, although price pressures moderated for the remained of the year up until the final month.

Last year saw the fastest annual rise in consumer prices in the past seven years, although overall price pressures remained muted.

In the years 2013-2018, consumer price inflation ranged from a negative 0.3pc in 2015 to a high of a positive 0.5pc annually.

One of the reasons for the relatively subdued level of inflation here in that period has been the sharp fall in the value of the British pound as that has reduced the cost of imported goods from the UK.

That has helped cut food prices as the State imported 48pc of its food and live animals from the UK, worth €3.8bn.

Falling food costs were one of the bright spots for consumers in January as they dropped 0.9pc.

Irish Independent