House prices rose strongly in April with the Permanent TSB House Price Index showing the largest monthly increase in nearly four years. With house prices now up 4.6 per cent since January, growth so far this year has already exceeded the 4.4 per cent recorded for the whole of 2001.

The strong rise in prices in the first four months of the year has been driven by a release of pent-up residential demand and the return of investors to the market following changes in the tax treatment of property investment.

National house prices continued to rise last month, increasing by 2.9 per cent, according to the latest figures, the biggest monthly rise since July 1998. The April increase compared with a price rise of 1.8 per cent in March and an increase of 1.2 per cent in April 2001.

Over the 12 months to end April, national house prices have risen by 4.9 per cent, according to the index, which is compiled in association with the Economic and Social Research Institute.

The latest figures show the rate of growth in house prices has gathered pace since the beginning of the year. The annualised increase to end April of 4.9 per cent compares with an annualised rate of 3.2 per cent to end March and 2.6 per cent to end February.

A breakdown of the latest figures showed that house prices continued to rise faster outside Dublin. The price of houses outside Dublin city increased by 3.4 per cent in April compared with an increase of 2 per cent in Dublin house prices. This followed increases of 2.2 per cent and 1 per cent respectively in March, while the prices of both Dublin and non-Dublin houses increased by just 1 per cent in April 2001.

In April the average price paid for a house in Dublin was €241,745. The equivalent price for a house outside Dublin was €169,020.

Second-hand house prices continued to increase faster than new house prices, the April figures show, with a rise of 3 per cent in second-hand house prices compared to a rise of 2.4 per cent in new houses. The average price paid for a new house in April was €192,309 while the average price paid for a second-hand house was €192,127.

The April year-on-year growth rates for new and existing houses were 4.2 per cent and 4.7 per cent respectively. The monthly price increases compare with increases of 0.4 per cent in new house prices and 2.5 per cent in second-hand houses in March.

Second-time buyers paid 3.4 per cent more for houses in April while the increase for first-time buyers was 1.8 per cent, reversing the trend of the previous month when the prices for first-time buyers increased by 2.5 per cent while second-time buyers paid 1.3 per cent more.

In April the average price paid by a first-time buyer was €166,511 while second-time buyers paid an average of €213,716. The average price for first-time buyers was up from €159,436 a year earlier while second-time buyers paid an average of €203,152 in April 2001.

Commenting on the latest figures, Permanent TSB head of marketing Mr Niall O'Grady said: "It's quite clear that house prices are on an upward curve driven by pent-up residential demand from last year and investors returning to the market. While the extent to which rises will continue is unclear, it seems inevitable that the rate of increase for this full year will be considerably ahead of that recorded last year."