House prices still surging despite rising mortgages

House prices continue to surge despite rising mortgage rates. The rate of increase in the cost of houses during the first four months of the year has outstripped last year. House values across Ireland grew by 6.6 per cent compared to 4.6 per cent for the same period in 1999.

The Irish Permanent House Price Index - compiled by the Economic and Social Research Institute - rose by 1.8 per cent in April. The average price paid by first time buyers has risen to £104,052 compared to £101.924 in March.

Prices outside Dublin continue to rise faster than those in the capital and are driving the index. This reflects the growth of satellite towns and also higher prices in Cork and other urban areas. House prices outside Dublin rose by 7.2 per cent during the first four months of the year compared to 3.9 per cent in the capital. For the eighth month in a row the annualised (12 month) rate of increase was higher for houses outside Dublin city and county. During the period April 1999 to April 2000 houses have increased by 22.2 per cent outside Dublin compared to 16.3 per cent in the city and county.

The rise in house prices is not surprising, according to Ms Marian Finnegan, an economist with Sherry FitzGerald, the State's largest estate agency.

Although mortgage rates have increased there has been no let up in the demand for houses and only a small increase in supply, she said.

The number of houses being built this year is only around 10 per cent more than last year, she said. "At the same time the economy is continuing to grow strongly and there is net migration into the State.

"People have a perception that house prices will slow down, but the conditions for a slowdown just don't exist," she said. Sherry FitzGerald's own index, which applies only to Dublin, shows that house prices have risen 7.9 per cent since the start of the year. Ms Claire Byrne, group product manager with Irish Permanent, said it was too early to predict the outcome for the full year but there was no sign of a slowdown.

"Most observers are predicting that prices will rise by up to 20 per cent over the year and it looks as though this forecast will be met," she said.