Auction Market:Dublin house prices rose by up to 25 per cent in the first quarter of 2006, but the gains were lost in the autumn, writes Orna Mulcahy, Property Editor

Dublin homeowners were sitting pretty at the beginning of 2006. House prices were entering a record tenth year of double digit growth, interest rates were still at historically low levels, and the market was about to go into overdrive.

The spring auction results were nothing short of sensational. New records were set week after week with frenzied competition in the auction room even for modest homes. In April a two-bedroom house in an estate in Stillorgan, Beaufield Manor, attracted nine bidders and a hammer price of €1 million. The selling agent had expected €650,000.

The newly introduced advised minimum values (AMVs) didn't help. While auctioneers attempted to make them as realistic as possible, buyers assumed they were just like the "come hither" guide prices of old and automatically added 10 or 20 per cent. Newly-refurbished houses attracted an even higher premium. Take 3 South Circular Road, a refurbished two-storey over garden level house auctioned by Felicity Fox in March. The AMV was €1.5 million. It made €2.42 million.

Meanwhile in Dalkey, Lisney put an AMV of €3.5 million on a house called Marlay on Saval Park Road which had clear development potential to build an additional house or houses in the grounds. It made €6.3 million. Elsewhere homeowners found themselves sitting on a fortune as developers chased houses with gardens that could be developed.

The peak came with the sale of a Gortanore, a family home on 2.8 acres in Foxrock village, an area that has seen a frantic pace of development in recent years. Lisney sold the property for €31 million, €11 million over the AMV. It was bought by auctioneer Daphne Kaye on behalf of developer David Arnold, who intends to develop it as a new village centre with both shops and homes.

Aerial photographers were busy all summer snapping large properties and their gardens, and the autumn saw a flood of potential sites coming to the marekt Developers have been slow to pay top dollar for these residential sites and many remain unsold.

Buyers at the top end of the market were choosy this year. They wanted big, they wanted redbrick and they wanted Dublin 4. They got it on Ailesbury Road where no less than seven houses were sold this year, for prices between €9.6 million and €15 million.

There was little activity on adjoining Shrewsbury Road, which is now only open to the super-rich, like deal maker Derek Quinlan who bought two adjoining houses, 1 and 3, for around €25 million. He intends to build one large house on the site.

Raglan Road, Elgin Road, Herbert Park and Park Avenue all saw new price records, though some of the top houses were sold off-market. According to one agent, professionals in particular like to buy, and sell quietly since their clients might be alarmed at their spending power.

The spending spree on redbricks continued into Dublin 6 where top prices were paid for houses on Palmerston Road and Temple Gardens. Smaller redbricks in Ranelagh and Rathgar also sold like hot cakes in the early part of the year. The prices were too good to be true - a glut of similar houses came on sale in the autumn and most are still on the market.

The pattern was repeated througout the suburbs where headline sales in the spring could not be matched in the months of September and October. The market had already peaked, but according to Alan Cooke of the IAVI, people only see a market peak in the rearview mirror.

With the stamp duty issue to worry over, the market was stalled until the budget. As of yesterday, agents were predicting that from now on, it would be business as usual. In fact business has been relatively brisk, they say, as buyers who have been sitting on the fence for months finally start to make offers. Still, there is a new reality out there and it's going to be particularly hard for young agents who have only known the boom. According to Douglas Newman Good director Stephen Manek, sales are taking a lot longer to complete. "We are valuing much more cautiously and we are having to work harder. This had to happen eventually. It will separate the men from the boys."