Sherry FitzGerald predicts house prices will grow by 20 per cent this year as the market recovers from the fall seen in the latter part of 2001.

An improvement in the residential housing market and a particularly strong performance from the new homes sector helped the group to post a 63 per cent rise in first-half pre-tax profits to €3.55 million.

The estate agent, which said turnover rose by 16 per cent to €15.9 million, also announced the launch of a new independent mortgage brokerage. Sherry FitzGerald Finance, a franchise agreement with mortgage brokers Simply Mortgages, will serve the estate agent's 67 franchise branches across the State.

Taken with Sherry FitzGerald's 11 offices in Dublin and Cork, the group now has 78 branded outlets and hopes to raise this to 100 by the end of next year.

Turnover in its residential property division rose by 12 per cent in the first half as confidence improved and investors returned to the market.

They accounted for 23 per cent of sales in the overall market and 24 per cent in its new homes market, Sherry FitzGerald said.

The latter turned in a very strong performance with fee income rising by 106 per cent as 2,982 new units were sold, an 83 per cent increase on last year.

Chief executive Mr Mark FitzGerald said the group sold houses worth €1.1 billion in total in the first half. House prices rose by 13 per cent in the six months to the end of June and it expected growth of half that again over the balance of the year.

"Although concerns exist regarding the rate of slowdown in Irish economic growth, the pipeline of new business across all our divisions is encouraging and the outlook for the second half of 2002 is positive," chairman Mr Donal Chambers said.

However, the commercial property arm did not perform as well, with fee income down 16 per cent on last year as the global slowdown took its toll.

Sherry FitzGerald said the business was well positioned to benefit from any recovery and was confident fees for 2002 would be broadly in line with last year at just over €7 million.

The group said its joint venture property portal, Myhome.ie, continued to perform well, with monthly page impressions now more than 4.5 million.

Sherry FitzGerald's share of its losses was €30,000 in the first half but the operation is nearly at break-even stage.

It has already reduced group advertising spend by 50 per cent and brochure costs by 63 per cent.

The group has already declared an interim dividend of 1.5 cents, which was paid in July.

The company, which was cash-positive to the tune of just over €1 million at the end of June, also reported considerable progress in paying down its debt.

At the end of the six-month period, it stood at €1.5 million, down from a high of €6.5 million in June 2000.