Investors have re-entered the new apartment market because of low mortgage rates and a sharp increase in rents, according to the latest price statistics.

The First Active House Price Index shows that while the cost of these units levelled off in the middle of 1998, they rose by 13.6 per cent in the final three months because of investor activity. Paul Reville, group operations director with First Active, said while the Bacon measures initially deterred investors, they started buying towards the end of 1998 because of the changed conditions. With interest rates down by 25 per cent over the year, and rents up by about 15 per cent, the yield on residential investments was sufficient to offset the loss incurred by the ending of mortgage interest relief.

The cost of residential investments increased by 18.4 per cent during 1998, of which 13.6 per cent occurred in the final quarter. In the same three months, the average price of second-hand apartments rose by only 0.1 per cent.

The First Active index shows that for the year, house prices rose by 27.8 per cent, 1 per cent less than in 1997. However, the final quarter prices were 35.8 per cent up on the final quarter of 1997. Dublin and the four surrounding counties continue to experience the most rapid increase in values, with prices up 10 per cent in the final quarter, compared with an increase of 3.2 per cent elsewhere. During the year, prices for new three-bedroom houses rose on average by 33 per cent, compared with 26 per cent for existing three-beds. New four-bedroom units increased by 35 per cent, as against 15 per cent for existing four-bed homes.