House prices rising at triple last year's rate

House prices are rising at almost three times the pace of last year, according to the latest Permanent TSB house price index. In the first five months of 2006, the price of the average residential property rose by 6.7 per cent compared to just 1.8 per cent in the same period last year.

The average price of a home nationally was just shy of €300,000 at €296,361, a rise of €18,500 so far this year.

Over the last 12 months, house prices have jumped by 14.5 per cent, compared to an annual rate of 6.6 per cent at the end of May last year and 13.2 per cent in April.

The May data, compiled in association with the Economic and Social Research Institute (ESRI), continues a sharply rising trend that commenced last October.

"Price growth nationally remained strong in May," said Niall O'Grady, head of marketing at Permanent TSB. "All sectors, particularly commuter counties, have experienced strong rates of growth. However, we expect that the recent ECB rate increase - the third in a series over recent months - will start taking some of the fizz out of the market over the remainder of the year."

The data are only likely to increase concerns among policymakers and economists about a property bubble and the continuing surge in mortgage debt.

A report published last week showed that Irish residential property prices had risen by a cumulative 270 per cent over the decade to the end of 2005 - at a time when inflation rose by just 30 per cent.

Property prices increased by 1.6 per cent last month alone after a 1.4 per cent rise in April and consistent rises of 1.2 per cent per month earlier in the year.

The average Dublin property last month cost €394,795 compared to €256,418 for homes outside the capital. People buying in commuter counties saw prices rising even more sharply - up 2.1 per cent last month and 15.7 per cent year-on-year. Prospective purchasers have seen the cost of homes in this region - Louth, Meath, Kildare and Wicklow - jump €25,000 this year alone to an average of €323,363.

Existing homeowners moving up the housing ladder saw steeper rises than first-time buyers last month, reversing the situation in April. On an annualised basis, however, newcomers to the property market have seen prices increase by 15.8 per cent compared to 14.3 per cent for existing property owners.

The gap between new and existing property continues to narrow with a new home costing an average of €291,380 nationally last month compared to an average second-hand house price of €298,096. New homes are 13.1 per cent more expensive than at the end of May 2005 while existing property has risen in value by 12 per cent.