Property prices are continuing to rise but the rate of growth is now definitely slowing following the introduction of new mortgage lending limits.
The latest official figures show prices nationally rose by 0.5 per cent last month and are now 13.8 per cent higher than a year ago.
In Dublin, where housing shortages are most acute, prices actually fell by 0.1 per cent in May, indicating an annual inflation rate of 15.2 per cent.
Since the Central Bank intervened in the market by introducing lending restrictions in January, annual property price inflation has moderated significantly.
Prior to last month, it had been running at over 20 per cent in Dublin.
The figures, collated by the Central Statistics Office (CSO), indicate Dublin house prices fell by 0.2 per cent in May while apartment prices rose by 0.4 per cent.
Outside Dublin, property prices rose by 1.1 per cent, and were up 11.9 per cent compared with the same month last year.
Property prices nationally remain 37.5 per cent lower than their peak in 2007, while in Dublin they are still 38.1 per cent off their boom time high.
Economist Alan McQuaid of Merrion Stockbrokers said the lack of supply of houses has pushed up prices, particularly in the Dublin area in recent years, but it is not something that can be rectified overnight.
He said planning permission data shows a jump since the second half of 2014, indicating things are starting to improve on that front.
Taking the figures from previous years into consideration, and assuming price rises continue to moderate over the rest of the year, Mr McQuaid said an average increase of around 9.5 per cent is projected for 2015.
John McCartney from Savills said the slowdown in growth comes despite a glut of house hunters seeking to close deals before “their old-style mortgage approvals run out”.
“We may see a further cooling off in price growth from September when those with legacy loan approvals have done their deals. In the longer term, there could be an off-setting pick-up in investor activity as rising rents are making buy-to-let returns look increasingly more attractive than bank deposits,” he added.
Dr McCartney said Savills calculates that the spread between returns on residential investment and banking deposits is currently two-and-a-half times what it was when buy-to-let activity was at its peak back in 2007.