Rents for residential property are rising in all the main cities according to letting and estate agents, who predict further increases due to provisions included in the Bacon report. The ending of incentives for investors arising from the Government's adoption of the report are likely to mean fewer of them getting involved in buying apartments and houses and putting them up for rent. In time, this will diminish the overall stock of housing available for renting.According to estate agents and landlord associations who spoke to The Irish Times, the decision to cut back on the special Section 23 tax relief which allowed investors to write off rental income on a number of properties against tax, is the most significant decision in the report. "People with money just won't get involved in property from now on, so I don't see how supply will be able to meet demand in the private rented sector," says Mr Richard O'Sullivan, manager of lettings at Christies Property Services in Dublin.While many in the property sector expect the rental market to shrink, it is likely that demand will increase, as house prices remain high and newcomers to the market find they cannot afford to purchase. The market is also being fuelled by the influx of foreign companies which choose to accommodate their employees in rented properties. Already large numbers of multinationals are persuading their employees to rent as it ensures their workers' mobility.Mr Daithi Downey, from Threshold, says the Government should be aiming incentives at the middle to lower end of the property market, as this will give many people the chance to rent and at the same time save for their own home.The increasing prevalence of contract working, particularly in the software and electronics industries, also has implications for the private rental sector. People working on a contract basis do not expect to stay in one place for very long, so committing themselves to a 25 year mortgage makes little sense, whereas renting an apartment does.Ms Yvonne Cripps, from Hamilton Osborne King, says the dramatic increase in rents does not seem to be discouraging potential tenants. "Only two years ago, we had one bedroom apartments in developments such as Clifden Court and Ellis Quay [in Dublin], commanding rents of £350 per month, they now achieve rents of at least £500 a month," she says."Yet we see increasing numbers of young couples, contract employees, young families relocating and people waiting for the residential market to cool down, coming into us looking for rental property," she said. Few people choose renting as an option to claim rent relief, which according to Threshold is "appallingly low" compared to that offered in most EU states.For example, a single person, no matter how much rent they pay annually is only entitled to maximum rent relief of £500 (or £1,000 if they are over 55 years of age). While this doubles for married people, it is still quite low, given that in the case of Dublin, event the lowest monthly rents are normally in excess of £300.Mr Paul Gleeson of Home Locators, one of the largest letting agencies in the Dublin area, says rising house prices mean the lower end of the market is being whittled away. "Some of those [landlords] with small bedsits or studios are deciding they're better off selling and forgetting about renting".Ms Eithne Butler, of Dial-A-Let says the strongest demand in Dublin is for rental property near the city centre. "Families tend to rent out in the suburbs, whereas younger, single people do not have a car and want to be near their workplace," she says.Mr Gleeson estimates a car-parking space adds £70-£100 per month to the rent of either a house or an apartment.Another factor fuelling growth in the rental market is the shortage of one bedroom apartments. "We are crying out for one bedroom units which suit single people in every way," says Mr Gleeson.He adds that most apartment building in Dublin in the last five to 10 years has concentrated more on two bedroom developments. "Single people are simply not prepared to pay for two bedroom units when they don't need the space," he says. Ms Marian Rose, who runs her own property company in Cork, says that while the market in the city is buoyant, there is also a shortage of one bedroom units - a situation she sees worsening after the Bacon report is implemented.The vast majority of rented apartments and houses are furnished. Unfurnished rented accommodation can be bad value, because it is often only marginally cheaper than furnished houses or apartments - even though the tenant must supply his or her own furniture.Ms Cripps says apartments and houses are now furnished to a very high standard and consequently higher rents are justified. "Like any product, you have to pay for quality," she adds.The advantages of renting are obvious for certain groups, but Threshold claims property law in the Republic means landlords can raise rents as high as they like."The only rights most tenants have under a lease is they have to be given one month's notice to quit, but after that the balance of power lies with the landlord," says Mr Downey.Increasingly, landlords are passing over the management of their properties to letting agencies and property management companies. The price of this often impacts on the monthly rent, so apartments and houses which are managed by an outside company can be more expensive than ones without.Many people are reluctant to take out a long term lease of say two or three years. But his can save them money. Almost all letting agents and landlords will give a discount if the tenant is prepared to take out a long term lease.