House-price inflation slowed down over the past three months, according to a report by estate agent Douglas Newman Good. But price increases of 17 per cent over the past 12 months indicate a strong recovery in the market after a turbulent period last year, according to the agents.

Second-hand residential property in Dublin increased by an average of 4.8 per cent over the last quarter, the report found.

The average price paid for a second-hand house rose to €306,207, up from €292,147, during the third quarter of the year, according to the latest quarterly house price study by the company. This continues the pattern of increases in residential property prices that began in January.

The latest rise indicates a gradual moderation of property inflation, following higher rate increases of 6.5 per cent and 7.1 per cent in the first two quarters of the year.

House prices rose 17 per cent in the 12 months to the end of September, compared with an increase of 8.6 per cent in the 12 months to June 2002. According to the report, this annual percentage increase reflects a strong rebound in the Dublin residential property market following a turbulent period during 2001 and has been largely prompted by measures introduced in last year's Budget.

Inflation in the third quarter had been more moderate than earlier in the year because the temporary boost to demand from the Budget last December was gradually tapering off, said Mr Paul Murgatroyd, economist with Douglas Newman Good.

"There is some indication that the autumn selling season will show an improvement in supply in the second-hand market and an easing of this constraint coupled with the tapering-off of the effects of last December's Budget points towards more moderate growth for the rest of the year," Mr Murgatroyd said.

Mr Keith Lowe, senior partner with Douglas Newman Good, claimed the price increases showed the strength of demand that still remained for residential property following a subdued market last year. Supply in the second-hand market for most of 2002 has been approximately 30 per cent lower than last year, contributing to the strong recover of residential prices.