House prices grew by 11.8 per cent in 2006, exceeding the previous year's growth rate of 9.3 per cent despite a sharp slowdown in the second half of the year.
As six hikes in interest rates took their toll on first-time buyers and supply caught up with demand, average house price increases dropped from 8 per cent over the first six months of 2006, to 3.8 per cent over the second half of the year, according to the latest house price index from Permanent TSB and the Economic and Social Research Institute (ESRI).
The double-digit average growth in the price of a house nationally was achieved despite a slowdown in the market over the second half of the year.
First-time buyers now pay an average of almost €280,000 to get a foothold on the property ladder, while overall the national average is around €310,000.
But the era of impressive gains in the market is now over, according to Permanent TSB and the ESRI, which predict that house price growth will average at 3-6 per cent this year. Last year, it predicted that prices would rise by 10 per cent.
Increases in Dublin prices in 2007 are likely to be higher than 6 per cent, however, as the supply of properties is failing to meet demand in the capital.
Permanent TSB's head of marketing Niall O'Grady said it was concerned that only 15 per cent of 2007 house completions were expected to be in the Dublin area, where 28 per cent of the population live.
"It is unlikely that prices in Dublin will come down at the same pace as in the rest of the country," he said.
In 2006, Dublin house prices increased by higher than the national rate, going up by almost 16 per cent to an average of €427,000.
However, it was Co Leitrim that stole the prize for the highest price growth, with the cost of buying property in the county increasing by 29 per cent last year.
Leitrim's growth spur means that it is no longest the cheapest county in which to buy property - that honour now falls to Donegal, where the average house price is €223,000. But the lowest increase last year was recorded in Sligo, where prices went up by just 6 per cent.
