Average cost of house in Republic rises 15% to €220,000

Gap between Dublin and rest of State remains pronounced with the cost of a home in the capital averaging €292,000

The average cost of a house in the Republic was €220,000 at the end of last month, almost 15 per cent more expensive than in June 2002, according to the results of a survey published yesterday.

The Permanent TSB and Economic and Social Research Institute (ESRI) index of house prices shows the average price of a house in the State has risen by 14.7 per cent over the year to the end of June. The cost of buying a place to live grew by 6.9 per cent in the first six months of the year.

The index shows that house price inflation in the year to June 2003 was running at twice the rate of the previous 12-month period, when it was 7.3 per cent.Permanent TSB's marketing manager, Mr Niall O'Grady, attributed the increase to the return of investors to the market, a large number of people seeking to trade up and the number of first-time buyers trying to get on the property ladder.

"The first six months of the year have clearly yielded a stronger rate of growth in house prices than had been predicted at the beginning of the year," he said.

The gap between Dublin and the rest of the State remained pronounced.

At the end of June, the average cost of a house in the capital stood at €292,000, €100,000 more than the average for the rest of the State. House prices grew by 16.4 per cent year-on-year in Dublin and by 12.9 per cent in the rest of the State.

New house prices grew by 8.7 per cent to hit an average of €227,568. But Mr O'Grady said new house prices fell by 1.3 per cent in June. He said that the slower rate of price growth in this part of the market reflected the fact the increased rate of new home building, which hit a record 58,000 units last year.

Overall, Mr O'Grady, said growth would remain strong for the forseeable future, driven by demand and population expansion.

Permanent TSB, which is responsible for one in every four home-loans made in the Republic, was due to publish a study of mortgage affordability yesterday. This would have measured borrowers' ability to repay. But the institution said it was not happy that this was ready for publication by yesterday.

The Central Bank recently began an audit of banks' mortgage lending practices due to concerns that the financial institutions were lending more to borrowers than they could repay.

The Central Bank's guidelines state that the total mortgage size should not exceed three times' the borrower's annual income.

Permanent TSB's chief executive, Mr Brian McConnell, said he believed that the Central Bank's concerns were not justified. Mr O'Grady said the recent half per cent drop in interest rates had eased the burden on borrowers.