Dublin homes demand 'hiking prices'
Demand for family homes in Dublin is outstripping supply and driving property prices up, experts warned.
A report on the property market found prices in the capital soared by more than 12% over the last year to September, with the price of a house up 4.2% since August.
Official figures also revealed the gap that continues to grow outside the capital, where prices dropped by 0.1% last month and remained 2.6% lower than a year ago.
David McNamara, an economist at Davy Stockbrokers, warned the divergence between Dublin and the rest of the country points to a market currently supported by a lack of supply, with an influx of cash buyers compensating for weak mortgage lending.
"The Irish property market extended its recent gains in September, with residential property prices rising 1.8% month-on-month and 3.6% year-on-year," he said.
"This was the fastest annual growth rate since September 2007 and was entirely driven by the Dublin market."
James Nugent, managing director of Lisney estate agents, warned the figures compiled by the Central Statistics Office (CSO) do 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 15% if taken into account.
"Stock is certainly also a large part of it too," Mr Nugent said.
"There was and is a shortage of stock in the Dublin market.
"People had put their purchasing on hold between 2008 and 2012. For five to six years they decided not to buy and they got frustrated."
Mr Nugent said the housing market is very much based on sentiment.
"If people believe the market value will rise they will put their money where their mouth is," he added.
Estate agents said while Dublin property prices are rising, they are working from an extremely low base.
House prices in the capital are still 49% down since the height of the boom in early 2007, with apartments in the capital 59% lower, and residential properties in the rest of Ireland down 48%.
Keith Lowe, chief executive of DNG, believes the CSO is playing "catch-up" on completed sales over the summer and that house prices will be 20% up in Dublin by the end of the year.
He said just 1% of the country's housing stock will be sold this year, and called for the Government to take action or introduce incentives to get new family homes built in the city and along the commuter belt.
"There's a severe lack of housing stock in the capital and that's what is driving prices up," he said.
"There needs to be more construction and new housing stock available in Dublin to meet demand.
"There are 15,000 to 20,000 new households being created each year and the majority of those want to live in Dublin.
"We are approaching a crisis in Dublin with increases in sales and in rents sector until new housing stock is built," he added.