Irish house prices rose by 11.5 per cent in the 12 months to the end of May, down from 12.9 per cent in the previous year, with the rate of increase declining to its lowest level in more than a year, writes Siobhan Creaton, Finance Correspondent.

The latest house price index, compiled by the Economic and Social Research Institute in association with Permanent TSB, suggests that the slowdown in the rise in house prices has continued each month since last July.

It records a 0.5 of a percentage point rise in the price of houses in May, which is significantly lower than the 1.2 per cent increase in April. The average price paid for a house nationally last month was €242,937, up almost €9,000 on that recorded in December.

Commenting on the index yesterday, Mr Niall O'Grady, head of marketing at Permanent TSB, said the moderation in house price growth was expected because of the increase in the number of new homes being built. He suggested that house price growth for this year could be 10-12 per cent.

House prices in Dublin grew by 0.9 of a percentage point in May while, outside of the capital, city prices increased by 0.7 of a percentage point. In April, the relative price increases were 0.7 of a percentage point and 1.5 per cent respectively.

In the first five months of 2004 Dublin house prices rose by 3.9 per cent, while the equivalent growth rate in the rest of the Republic was 4.6 per cent.

In May, the average price paid for a house in Dublin was €319,365 compared to €213,173 elsewhere. The equivalent price a year ago was €285,216 and €189,236 respectively.

House prices for first-time buyers increased by 0.4 of a percentage point while second-time buyers experienced a 0.7 of a percentage point rise. This compares to changes of 0.4 of a percentage point and 1.5 per cent in April.

In the five months to the end of May, house prices rose by 2.6 per cent for first-time buyers and by 4.5 per cent for second-time buyers.

On a year-on-year comparison, house prices grew by 9.5 per cent and 12.9 per cent for first and second-time buyers.

In May 2004, the average price paid by a first-time buyer was €210,544 rising to €275,438 for second-time buyers. The equivalent price in May 2003 was €192,340 and €243,922.

The price of new houses rose by 1 per cent in May while second-hand house prices rose by 0.5 of a percentage point.

Over the first five months of the year the price of new houses increased by 5.7 per cent while second-hand houses have risen in value by 3.7 per cent.