PROPERTY prices in Dublin are now rising faster than they were during the height of the boom.
A shortage of family homes in certain parts of the capital, combined with a pent-up demand from cash buyers, is driving fierce competition.
Startling trends were recorded in the capital as property prices rocketed by an unprecedented 3.9pc last month – taking the annual increase to 12.2pc.
The figures released by the Central Statistics Office (CSO) suggest a hefty rise of €12,000 on the value of a €300,000 Dublin home during the space of just four weeks in September. However, outside the capital, prices dropped by 0.1pc last month and remained 2.6pc lower than a year ago.
The statistics add even greater weight to warnings about a new property bubble emerging in Dublin, five years after the market crashed. And property experts say that they expect further rises – with an annual increase of 20pc expected in Dublin before the end of this year. A spokesman for Environment Minister Phil Hogan said the Government "can't react to every statistic that comes out".
The figures are, however, a boost to the thousands of homeowners in negative equity in the capital, who for years have been saddled with hefty mortgages amid falling house prices.
In large swathes of the country, activity still remains flat, meaning that a serious divide is emerging between city and country prices.
Now the Government is under pressure to ensure enough housing stock is released to avoid another bubble in the capital, and to make sure families have options for affordable homes.
According to estate agents, the latest figure for Dublin is the highest monthly increase in memory – a rise not
experienced even at the height of the boom.
Most estate agents believe that the CSO figures are already out of date, and point out that they exclude cash purchases.
Many experts now predict that the true Dublin price rise will be between 15pc and 20pc as we near the end of the year.
Price inflation is being caused by an acute shortage of houses for sale, exacerbated by the lowest new-home output since records began.
Agents say an element of panic has fuelled the increase, as cash buyers and buyers with savings realise prices are now rising fast, and are therefore bidding more aggressively.
However, a spokesman for Mr Hogan said the market could turn again very quickly.
"The housing market is still volatile and could change again as quickly in a couple of months," he said.
"For that reason, we can't react to every statistic that comes out. Minister Hogan also concurs with Minister (Jan) O'Sullivan's recent comments: that the problem does not demand the rezoning of new land – there is enough rezoned already – and that much of the shortage is being caused by the difficulties among developers in getting bank finance for house-building projects.
"We would also add that Part 5 (the legislation which demands that developers contribute 20pc of their schemes for social housing) is currently under review and something might come of that to help ease the situation."
James Nugent, managing director of Lisney estate agents, warned that the CSO figures did not include cash-buyers, which account for more than half of the housing market.
He believes the year-on-year increase in Dublin could be as high as 15pc if they were taken into account. "If people believe the market value will rise they will put their money where their mouth is," he said.
Keith Lowe, chief executive of Douglas Newman Good, believes house prices will be 20pc up in Dublin by the end of the year. But he said just 1pc of the country's housing stock would be sold this year, and called for the Government to take action to get new family homes built in the city and along the commuter belt.
However, he urged caution – pointing out that property prices in Dublin were still coming up from a very low base.
"While this monthly figure of 3.9pc seems extraordinarily high, what you have to remember is that a two-bedroom apartment which sold for €300,000 in 2007 was worth just €100,000 by August this year.
"It's still worth less than 50pc of its value six years ago."
Chief economist with Bloxham Stockbrokers, Alan McQuaid, also said people should not yet be panicking about getting on the property ladder.
"I think prices in Dublin will continue to rise, but you can only go so far. A lot of the market is cash. Unless you get back to a situation where banks are lending, you will see prices start to peak off relatively quickly.
"I don't see us recovering the 50pc we've lost, but maybe a 10pc to 20pc gain over the next three years," he said.
He added it was likely that Galway, Limerick and Cork were also recovering.
House prices in the capital are still 49pc down since the height of the boom in early 2007, with apartments 59pc lower, and residential properties in the rest of Ireland down 48pc.
Planning permission is in place for more than 100,000 units, including almost 10,000 in Dublin. There is enough land zoned and served with infrastructure for almost 395,000 homes across the country.
But the Construction Industry Federation warned that it cost €197,000 on average to build a three-bedroom semi-detached home, before VAT and land costs were taken into account.
Asking the Government to look again at the issue of development levies, it said: "The cost of building will have to come down."
By Mark Keenan and Paul Melia